Continued - ESA and tax and means-testing

markdavies2013

I am very grateful to those people who have raised questions about ESA and means-testing and taxation and to those who have been kind enough to answer them as I have been wondering about these issues. Much appreciated.
My dad, ahged 62, has been on Incapacity Benefit (previously IVB) since 1987 when his health deteriorated dramatically. He receives a taxable pension from his old employer due to his ill-health (although this is not taxed as it is below taxable threshold). A few years ago, he sold his house as he was so ill and moved into a bedsit type flat as it was easier for him to look after and keep warm in: through this he has capital over £16000.
In sum, because of his works pension and capital, he would be excluded from any means-tested benefit.
I assume he will soon receive an ESA50. Now, if he succeeds in making it to the ESA support group, I understand from the answers left here that the ESA will not be means-tested, but will be taxed (the ESA will take him over the taxable threshold). So, in effect he will be worst off than he is now as he will be paying tax on/because of the ESA while he pays no tax now on his Incapacity Benefit.
I am surprised at this as I thought the Support Group was not supposed to leave anyone worse off. Have I misunderstood?


Mark:silenced:

princessdon

To be fair with that amount of savings can you not see the logic?

All he loses is a bit of Tax - many in the support group have similar or worse needs and have less income.

Horseunderwater

Should your Dad manage to get ESA support group rate (£105.05/week) he can have an income before tax of £155.87/week. Is his pension totalled with other figure more than that? That is for this year. Next year personal allowance is £9440 or £181.53/week. ESA will be £106.50 - if he is or will be getting an income of over the personal allowances then yes it is only right and fair that he should pay a little income tax once more.

markdavies2013

To be fair with that amount of savings can you not see the logic?
All he loses is a bit of Tax - many in the support group have similar or worse needs and have less income.

I asked whether my understanding was correct, not for your opinion
about the legitimacy or supposed morality. Kindly keep your inane viewpoints to yourself.

Two4Tuesday

https://www.gov.uk/taxable-income/state-benefits-that-are-taxable

Incapacity Benefit is taxable once you have been receiving it for 29 weeks. If your dad was not paying tax on it, then it means it didn't bring him over the taxable amount threshold.

In that case, he either wouldn't pay tax on his ESA, or if it brought him over the tax threshold, he would only pay tax on the part above the threshold.

So your understanding is incorrect. He wouldn't be worse off under ESA.

rogerblack

A pension may reduce the amount of contributory ESA paid.
As I understand it, every pound over 85/week will reduce on a 2 for 1 basis.
So, if you have a pension of 185/week, your contributory ESA goes down by 50 pounds a week.