New 20% benefits stealth tax

melly1980

BigAunty wrote: »

I haven't come across a single article which has said there is a policy about to be implemented which will tax all benefits at 20%.

The whole focus on benefit changes that I notice are to do with the proposed move to Universal Credit from 2013.

While there are significant changes with that particular overhaul, I can't remember seeing anything in the policy paper for UC about taxing benefits either.

Until I am presented with different evidence, I really think this is a fuss over nothing caused by the OPs friends not understanding the difference between the tax and benefit system, confusing the tax free personal allowance and assuming that all benefit related income above it will result in a 20% taxable charge.

Their worries, I think, is total mince and does not apply to means tested benefits.

the taper for UC is about 20% higher than for tax credits, perhaps they mean this??

tatonette

This is quite common. Most claimants that are receiving a taxable benefit, ESA, OAP etc are already registered with HMRC to submit an annual tax return and pay their tax once a year.

I don't understand the problem here. If you receive a taxable income that has not had tax already deducted from it and the total of your taxable income is more than your personal allowance, then you will pay tax like the rest of us do.

suelees1

zagfles wrote: »

Yawn, not another scare story swallowed by gullible Mirror reader types who believe all the "tories pitchforking babies" type stories....

Well I'm a Guardian reader but do believe Tories would pitchfork babies but only those from benefit reliant families so it would be less of a drain on the welfare state

BigAunty

melly1980 wrote: »

the taper for UC is about 20% higher than for tax credits, perhaps they mean this??

It's a good theory but the OP was discussing a letter that went out to their friends from the HMRC.

As UC is just a proposal, unratified by parliament, and nowhere near being policy, I can't see why a letter from the HMRC would discuss UC.

zagfles

melly1980 wrote: »

the taper for UC is about 20% higher than for tax credits, perhaps they mean this??

No it isn't. The UC taper is on net income, the TC taper is on gross income.

The TC taper is 41%, which, as it's on gross income, you need to add tax & NI to, and it comes to 73%.

The UC taper is 65%, but as it's on net income, the taper applies after tax and NI have been deducted. Works out to about 76%.

So it's slightly higher for those just on tax credits, but it's a lot lower for those claiming JSA/HB/CTB etc, who have a taper up to 100% now.

melly1980

zagfles wrote: »

No it isn't. The UC taper is on net income, the TC taper is on gross income.

The TC taper is 41%, which, as it's on gross income, you need to add tax & NI to, and it comes to 73%.

The UC taper is 65%, but as it's on net income, the taper applies after tax and NI have been deducted. Works out to about 76%.

So it's slightly higher for those just on tax credits, but it's a lot lower for those claiming JSA/HB/CTB etc, who have a taper up to 100% now.

but other than that I was right :rotfl:

zagfles

melly1980 wrote: »

but other than that I was right :rotfl:

Only 20% :rotfl:

Cpt.Scarlet

The government aren't going to apply taxes to benefits, if nothing else the cost of modifying systems to deduct it would out way any income they received, however, there is no need for them to do this, they will simply continue to inform HMRC of any taxable benefit, and they will issue you a new tax code which reflects the benefit deucted from your personla allowance, tax is then collected from any other income you have.

clareabella666

we got a letter from HMRC today but that was just information on how in order to reciever working tax credits we have to work at least 24 hours between us. Not a problem OH works 25 and im about to start part time working 15 hours a week so thats sorted plus we wont be entitled to much anyway when i start. not that i mind, i would rather be worse off and working. I get depressed being stuck at home.

zagfles

clareabella666 wrote: »

we got a letter from HMRC today but that was just information on how in order to reciever working tax credits we have to work at least 24 hours between us. Not a problem OH works 25 and im about to start part time working 15 hours a week so thats sorted plus we wont be entitled to much anyway when i start. not that i mind, i would rather be worse off and working. I get depressed being stuck at home.

You won't be worse off, in fact your tax credits probably won't go down at all till April and then only a bit - much less than your increase in earnings - as there's a £10k disregard for income increases from one year to the next.