Taxing my incapacaty benifit help

peter421

5 years ago I was retired medicaly I recieve a small pension higher rate DLA care and incapacaty benefit, in 2004 the dwp told me I dont pay tax on my incapacaty benefit as I am excluded because I receive the higher rate dla care.

last month I received a letter off the inland revenue stating that they are combining my pension and Incap and taxing me, I will get taxed hard and it will really put pressure on me I havent budgeted to be about 300 pound down a month from paying 50 pound a month tax,I have contacted the tax and the dwp and they dont know of any rules that exclude me from tax but I remember them telling me 5 years ago all I can find is this.

Pension income rules

If you make a new non-linking claim to Incapacity Benefit and have a gross pension income of more than £85 a week, the amount of benefit payable will be reduced by half of the excess.
The excess is the difference between £85 and the actual pension income. For example, for a pension income of £100, the excess is £15. The amount of Incapacity Benefit payable is reduced by half of that, which is £7.50.
Exceptions

This rule does not apply if:

• you were in receipt of Incapacity Benefit before 6 April 2001
• your claim is made under the linking rules for Incapacity Benefit and links back to before 6 April 2001
• you receive the highest rate of the care component of Disability Living Allowance

healy

peter421 wrote: »

5 years ago I was retired medicaly I recieve a small pension higher rate DLA care and incapacaty benefit, in 2004 the dwp told me I dont pay tax on my incapacaty benefit as I am excluded because I receive the higher rate dla care.

last month I received a letter off the inland revenue stating that they are combining my pension and Incap and taxing me, I will get taxed hard and it will really put pressure on me I havent budgeted to be about 300 pound down a month from paying 50 pound a month tax,I have contacted the tax and the dwp and they dont know of any rules that exclude me from tax but I remember them telling me 5 years ago all I can find is this.

Pension income rules

If you make a new non-linking claim to Incapacity Benefit and have a gross pension income of more than £85 a week, the amount of benefit payable will be reduced by half of the excess.
The excess is the difference between £85 and the actual pension income. For example, for a pension income of £100, the excess is £15. The amount of Incapacity Benefit payable is reduced by half of that, which is £7.50.
Exceptions

This rule does not apply if:

• you were in receipt of Incapacity Benefit before 6 April 2001
• your claim is made under the linking rules for Incapacity Benefit and links back to before 6 April 2001
• you receive the highest rate of the care component of Disability Living Allowance

What you have quoted relates to a reduction in Pensions when on IB.

You are still liable to pay tax if your IB and Pension take you over the personal tax allowance.

krisskross

For most people Incapacity Benefit although taxable is often not because it is within the tax free allowance. DLA is non taxable. However when combined with other income, like a pension, then tax will become due . Exactly the same as me having to pay income tax because my State and occupational pensions together amount to more than my tax free allowance.

peter421

Looks like I have got away with it for years then,the inland revenue have said they wont back tax me because dwp never informed them,dwp told me they didnt have to as I didnt pay tax,looks like someone got it wrong!

Saversue

Your tax should have been taken off by whoever pays your pension. I am in a similar position and the Incapacity benefit is added to your Pension and the total is taxed minus your single person allowance or whatever your tax free allowance. It actually means that getting some form of Ill-health pension works against you, because it means you are over the limits to claim load of other benefits.