Tax on Incapacity Benefit?

weatherwax_2

If someone's husband is employed(basic rate taxpayer), but his wife has been on IB for several years, does the personal income of £4745 apply to her? Her IB for the year (including Christmas bonus of £10) totals £4942.72.

Also, they are about to put around £8000 into a savings account, so would it be beneficial to open an account in the wife's name? How would the tax apply in this case?

Any advice much appreciated.

deemy2004

If someone's husband is employed(basic rate taxpayer), but his wife has been on IB for several years, does the personal income of £4745 apply to her? Her IB for the year (including Christmas bonus of £10) totals £4942.72.

Also, they are about to put around £8000 into a savings account, so would it be beneficial to open an account in the wife's name? How would the tax apply in this case?

Any advice much appreciated.

Incapacity benefit is not taxable for the first 28 weeks of incapacity. So in your wifes case it is taxable, unless when you say several years you mean more than 9.

So her taxable earnings are £4942.72, Which means she owes tax on about £200 at 10% or about £20.

It would be beneficial to open the savings account in the wifes name in a sense that you can cliam back 10% at the end of the tax year using R40 as the next £2,020 above £4,745 is taxed at 10%.

weatherwax_2

Incapacity benefit is not taxable for the first 28 weeks of incapacity. So in your wifes case it is taxable, unless when you say several years you mean more than 9.

So her taxable earnings are £4942.72, Which means she owes tax on about £200 at 10% or about £20.

It would be beneficial to open the savings account in the wifes name in a sense that you can cliam back 10% at the end of the tax year using R40 as the next £2,020 above £4,745 is taxed at 10%.

Re

So in your wifes case it is taxable, unless when you say several years you mean more than 9.

Thanks deemy. She has been on IB since 1992 so what would her position be?

Ted_Hutchinson

Re

Thanks deemy. She has been on IB since 1992 so what would her position be?

From IB1 - A guide to Incapacity Benefit (IB1 Oct 2004)
If you claimed benefit before 13 April 1995
If you were getting Sickness Benefit or Invalidity Benefit on 12 April
1995, you were automatically transferred onto Incapacity Benefit.
These claims are known as ‘transitionally protected’.
If you were receiving Invalidity Benefit on 12 April 1995, the following provisions apply:
• Invalidity Benefit became long-term Incapacity Benefit
• benefit is not taxable
• all components payable prior to 13 April 1995 remain payable
• people under state pension age receiving Additional Pension
will continue to receive Additional Pension, but it is frozen at
1994 rates.
Transitional protection will not apply to any further claim if your
entitlement to Incapacity Benefit stops for more than 8 weeks, unless there is a link to Disabled Person’s Tax Credit, or a training course, or you are entitled to a 52 week link to Incapacity Benefit.
If an adult dependant increase stops for a continuous period of more than 8 weeks starting on or after 16 February 1995, transitional protection for adult dependant increase will cease to apply.