income tax and ESA

dave030445

do you pay tax on esa the reason i ask is that a got a letter from the tax man saying i owe some tax cause i was on the wrong tax code. I thought ESA was tax free.

Caz3121

Contributions based is a taxable benefit, income related is not
http://www.turn2us.org.uk/information__resources/benefits/esa.aspx

Chorlie

dave030445 wrote: »

do you pay tax on esa the reason i ask is that a got a letter from the tax man saying i owe some tax cause i was on the wrong tax code. I thought ESA was tax free.

Contribution Based ESA is Taxable, if you're income is above your free tax amount, then you have to pay tax. I have a small Pension and ESA, so I have to pay tax. I have 2 tax codes, one for my pension and another for the ESA.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Illorinjured/DG_171896

dave030445

Hi thanks for that im on income related ESA thats what i cant understand.

dave030445

I dont get any other income that's taxable

MrsManda

dave030445 wrote: »

I dont get any other income that's taxable

Is the letter referring to underpayment of tax for the current tax year or a previous tax year?

Muttleythefrog

I was completely thrown by my tax situation on ESA because I get Contrib & Income related ESA. I thought that was just a generic reference to my benefit in their dodgy 'how much we pay you' letter. But it turned out I am getting mostly contrib ESA with a bit of IR ESA. So most of my ESA payment is taxable but not all... and there was nothing in black and white to say what proportion. I only found out that proportion when I queried my P60U.

dave030445

MrsManda wrote: »

Is the letter referring to underpayment of tax for the current tax year or a previous tax year?

This year. Oh i don't understand it all think i should just pay it.

krisskross

Muttleythefrog wrote: »

I was completely thrown by my tax situation on ESA because I get Contrib & Income related ESA. I thought that was just a generic reference to my benefit in their dodgy 'how much we pay you' letter. But it turned out I am getting mostly contrib ESA with a bit of IR ESA. So most of my ESA payment is taxable but not all... and there was nothing in black and white to say what proportion. I only found out that proportion when I queried my P60U.

I thought you got one or the other, wasn't aware you could get a mixture. We learn something new everyday.

Muttleythefrog

krisskross wrote: »

I thought you got one or the other, wasn't aware you could get a mixture. We learn something new everyday.

lol... ditto. I still wouldn't know if I hadn't have had hundreds of pounds worth of tax money owed to me at HMRC... not as many hundreds as I'd thought because of the contrib. element. The breakdown in the 'how much we pay you' letters says 'we call this Contrib & I R ESA' but the actual breakdown gives no clue I'm literally getting a bit of both. Because the vast majority of my payment is contrib. based the P60U appeared, without forensic detailed breakdown (and further confused by fact in same tax year I received a bit IR JSA), to be taxing me on all my ESA while I was telling people I was in receipt of non taxable IR ESA for other benefits purposes. Fortunately my panic was contained by the reassurance from the operator that I had not been deceiptful and am indeed technically receiving IR ESA and would be entitled to it in full if not getting a contrib based element.