Not too sure tax code is correct & that tax should be paid.

Mikeyorks

xylophone wrote: »

In short, your mother needs to advise HMRC of her full financial circumstances for 2012-13 so that the appropriate code can be applied?

That is the purpose of the P161.

jem16

xylophone wrote: »

I take it that like the state pension, the IB is not taxed at source?

All state benefits are paid gross.

jem16

K_P83 wrote: »

That just bamboozled the hell out of me :rotfl:

As state benefits are all paid gross, any tax due is taken by an adjustment to the personal tax-free allowances.

So basically the tax-free personal allowance of £8105 for tax year 2012/13 is reduced by the amount of IB being paid. So if that's £5192 then you take that amount off the £8105.

However you need to find out the date when your mum first received her IB as it may not be taxable.

http://www.hmrc.gov.uk/manuals/eimanual/EIM76180.htm

BoGoF

jem16 wrote: »

All state benefits are paid gross.

99% true. DWP can deduct tax at source from IB in certain circumstances and tax is deducted at source from deferred state pension.

Nine_Lives

jem16 wrote: »

As state benefits are all paid gross, any tax due is taken by an adjustment to the personal tax-free allowances.

So basically the tax-free personal allowance of £8105 for tax year 2012/13 is reduced by the amount of IB being paid. So if that's £5192 then you take that amount off the £8105.

However you need to find out the date when your mum first received her IB as it may not be taxable.

http://www.hmrc.gov.uk/manuals/eimanual/EIM76180.htm

Thanks Jem

As for finding out the date - is this necessary? I notice it says that it's not taxable for the first 28 weeks. She's been on IB for a LOT longer than 28 weeks. She's been on it for years.

jem16

K_P83 wrote: »

Thanks Jem

As for finding out the date - is this necessary? I notice it says that it's not taxable for the first 28 weeks. She's been on IB for a LOT longer than 28 weeks. She's been on it for years.

If you read the link I gave you, it says that those on IB prior to 13th April 1995 may well be exempt from tax.

xylophone

From link EIM76180 - Social security benefits: incapacity benefit: summary
IB is taxable except:


for the short term benefit paid at a lower rate for the first 28 weeks of incapacity
where the recipient is over pensionable age and receives a higher rate of IB than the basic short term rate for the first 28 weeks of incapacity
if DWP makes ex-gratia top-up payments to people over pensionable age
where IB is payable to a person who was entitled to invalidity benefit prior to 13 April 1995 (when incapacity benefit replaced invalidity benefit) provided the benefit is in respect of the same period of incapacity. (However, if the person was entitled to Sickness Benefit prior to 13 April 1995 then the IB became taxable when that person started to receive the short-term higher rate of IB.) The DWP may ignore short periods of work when determining a period of incapacity, but if a period of work is not ignored, so a recipient who had a period of incapacity before 13 April 1995 starts a new period of incapacity after that date, the IB will be taxable after 6 months under the normal rules.
As they know the details of the claim, the DWP is responsible for determining whether IB is taxable and notifying the Revenue when a person starts to receive taxable benefit. If there is any doubt whether IB is taxable, the person receiving the IB should be asked to seek clarification from the DWP.

Age related additions to long term IB are payable to individuals aged under 45 years old. These additions are taxable.

From the figures you gave above it appears that your mother has been receiving IB from before her 45th birthday (because she is receiving the lower rate age allowance), http://www.dwp.gov.uk/docs/benefitrates2012.pdf http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Illorinjured/DG_10018913 but the question appears to be does she fit into the category set out above?

Nine_Lives

Ah right.

In that case, no she wasn't on it prior to 1995. She was last in work at the back end of 2003 - so she'd have been 41. She would've started on benefits around or slightly after this as she was on long term sick before she was finally let go on medical grounds.

xylophone

Then see post 11 and 12?

chunky_monkey_6

K_P83 wrote: »

Ah right.

In that case, no she wasn't on it prior to 1995. She was last in work at the back end of 2003 - so she'd have been 41. She would've started on benefits around or slightly after this as she was on long term sick before she was finally let go on medical grounds.

Hi,

Is your Dad's pension the only pension that you're mum is receiving? I think the tax office are assuming that your mum has more than 1 source of income other than her benefits.

If she is only receiving the benefits you've mentioned plus your Dad's pension I would suggest she phones that tax office & explains this. They may request it in writing, but should amend her tax code accordingly.

If she isn't confident about speaking to the tax office, she could always give you authorisation to talk to them on her behalf (I can't remember if there is a form to do this, or if she merely needs to send them a letter).