Cannot find the answer to this anywhere - does anyone here know?

willing2learn_3

Hi everyone

I have a question re housing benefit - how is it affected if you receive a small financial pay out from your employer - approx £750 - £850 - and pay it into a pension fund or a company savings plan?

I was told by a colleague at work that it would be sensible to put the money straight into the pension scheme - i never usually earn enough to pay into one....but I was too late for that, so I put it into the company savings plan.

Now that it's in this plan it means that I didn't lose any tax or national insurance off it - so the actual amount is £1000. IN other words it wasn't taxed and NI wasn't taken off it.

My net pay was just over £500. My housing benefit has been stopped and it seems they are a bit confused about this plan....I don't want to do anything wrong but I was under the impression from this colleague that it was perfectly legal to do this and that housing benefit will assess me according to net pay under salary sacrifice rules....

but I think that only applies to pension? I'm confused....I was just trying to do the best thing and am trying to get to a point where I won't require the benefit. I'm not trying to out do the system or anything. The girls at the housing benefit office were ok about it and friendly, etc, and said they'd look into it....but I think the whole thing confused them and I'm wondering how to I find out what the rules actually are?

I found one small bit of advice from a document provided on my employer's website, but confused even by this I'll paste it below in case any brains out there can explain...

"How will buying shares affect my means-tested benefits?
The amount of capital you own, and the amount of your net income, affects your entitlement to means-tested benefits.

If you or your partner is receiving one of these benefits when you buy shares through the plan, because your net income (including the value of the shares you buy) rises, you may receive less benefit.

The market value of shares, however you buy them, is treated as capital, owning shares can reduce your entitlement to means-tested benefits if the share value takes your capital above the lower limit.

Means-tested benefits include

• Council Tax Benefit (CTB);
• Housing Benefit (HB);
• Income Support (IS);
• Income-based Jobseeker’s Allowance (JSA(IB));
• Income-related Employment & Support Allowance (ESA(IR)); and
• Pension Credit. "

My savings plan is kind of buying shares - but they are fixed shares - they don't go up or down in value....they do pay a dividend each year and you get the tax and NI saving that I mentioned.....obviously I would decalre the dividend....my payslip declares the whole thing to the benefits office and I sent them the slip.....

anyone know about this stuff? the closest information I can think of is how this relates to paying into a pension scheme under salary sacrifice - which i'd never heard of until a few months ago so have never done this.

Working Tax Credits were very clear about it - they said they will assess me on net pay only.

Would be so grateful for anyone who can help as my housing benefit has been stopped. I don't want any more than i'm entitled to....but I just don't want to overlook anything.

thanks.

BigAunty

I can't answer your question but in general, capital for means tested benefits focusses on things the claimant can access and turn into cash, which is why it includes things like ISAs, premium bonds and shares and excludes things like pensions.

willing2learn_3

Thanks that's understandable - but as 'capital' it shouldn't have stopped my benefit......it should have done if it was counted as income though....if i'm making sense

BigAunty

willing2learn wrote: »

Thanks that's understandable - but as 'capital' it shouldn't have stopped my benefit......it should have done if it was counted as income though....if i'm making sense

Yes, that's clear. I'm not aware of any way of legitimately reducing income for benefits other than pension contributions but other more experienced members may be able to be more specific.

I can see that you bypassed receiving it directly within your wages but that might not be enough for it not to be classed as income.

xylophone

"A small financial payout" - a bonus that increases your taxable salary for the year?

Shares in the Company Savings Plan - a 'benefit in kind" under a salary sacrifice scheme?

"Shares that don't go up or down in value" - puzzled by this.

"Your net income increases" because you have received a bonus and because you are receiving the dividend?

Are these share actually shares in the company itself? Is the company quoted?

What class of shares are these?

willing2learn_3

xylophone - sorry it doesn't belong on the company's website - it's from revenues....here's the link:

http://www.hmrc.gov.uk/pdfs/ir177.htm

willing2learn_3

xylophone wrote: »

Are these share actually shares in the company itself? Is the company quoted?

What class of shares are these?

Yes shares in the company itself. I don't know what class of shares - I don't know a lot about this and there's nothing in the literature - the company does not have shareholders only it's own staff (not on the stock market)....don't know if that helps

willing2learn_3

xylophone wrote: »

"Your net income increases" because you have received a bonus and because you are receiving the dividend?

what I don't understand is that - I thought net income is the income you have after tax and NI is taken....if the money is paid into the scheme then it doesn't form part of my net income, that's correct isn't it? On my payslip the amount is taken as a deduction and my net pay at the end of it all doesn't include any of it and is a separate amount for the work done that month.

pmlindyloo

I think this is a simple mistake at the housing department. Did you take in your payslip to show them?

I think they have seen the amount on the payslip and did not understand what it was and where it went. I think they have taken it as income which is why your HB has been suspended.

It would be nice to think that everyone in the benefit departments know what they are doing but sadly this is not the case.

Go back and ask to speak to a supervisor and ask that your HB is reinstated immediately (obviously take the relevant paperwork with you)

Mistakes are made and from what you have said I can see no reason for their taking this as income (which they obviously are because they have suspended your HB)

willing2learn_3

pmlindyloo wrote: »

Mistakes are made and from what you have said I can see no reason for their taking this as income (which they obviously are because they have suspended your HB)

Thanks my housing office is a long distance away and my car is off the road so i cannot easily go in - they have seen the payslip....they said that the amount would be seen as savings but then as they said it it sounded like they mean't it would be seen as income....

I don't mind if it has to be included as income - I just want to know for sure....i thought HB was worked out on the net pay received.

xylophone

http://www.eden.gov.uk/benefits-and-tax/benefits/housing-benefit/how-housing-benefit-is-calculated-and-paid/ might throw some light.
Your best bet might be to write to HMRC and get a ruling on whether the bonus counts as income - it seems to me that it does. Indeed as you paid no tax or NI on it, they could regard you as having received £1000?
For purposes of HB they might average it out over a year say £20 a week?

You seem to have been wrestling with this problem for a long time?https://forums.moneysavingexpert.com/discussion/1639777