paying income tax on ESA

dave030445

fira wrote: »

Dave

A similar thing happened to me and I couldn’t get my head around what/how tax was paid on it. Hope this helps a wee bit as I was new to claiming the benefit and it all seemed to go wrong tax-wise, then fixed.

I went on to ESA (C) Sept 2015 and the claim ended three months later. As I have a small pension, I received £419 ESA in those three months.

In early December 2015, around 2 weeks before the claim was due to end, I got a tax notice from HMRC saying my tax code had been reduced immediately from 1060L to 811L. They had deducted a whopping £2482 from my personal allowance for the ESA ‘paid’. I called them and actually got a helpful bloke who explained that they had been advised by DWP that ESA had been awarded to me, and the date it started. He said they had their own system of averaging/calculating out a forward projection to the end of the tax year, 5th April 2016, of what ESA I would be paid and then adjust my tax-free allowance and code by that amount.

I explained that I would not be going for another fit note, was going to close the claim and figured I’d only have been paid £419 ESA when that happened. He asked me to wait until DWP sent me my P45 after they’d shut my ESA down, give HMRC a ring again with the details on it and they would amend the code.

When the P45 arrived showing what I’d been paid, I did just that, the HMRC guy I spoke to this time did the adjustment as we spoke and my code has gone up to 1018L. I was sent a revised Tax Coding/Personal Allowance notice.

It was annoying that their calcs seemed to use the full rate of ESA, times the weeks between September 2015 to 5th April 2016. To be honest I still cannot work out how they reached the sum of £2482!!

Bill

Hi thanks for that very helpful. for this year they have reduced my personal allowance to -£749 so paying loads of tax which we really can't afford.

fira

dave

Your tax notice should show what deduction from your personal allowance they have made for ESA paid (possibly forward projected up to 5th April 2016). Does the amount tally with the ESA you have actually received/will receive by 5th April? Bill

dave030445

fira wrote: »

dave

Your tax notice should show what deduction from your personal allowance they have made for ESA paid (possibly forward projected up to 5th April 2016). Does the amount tally with the ESA you have actually received/will receive by 5th April? Bill

the tax code ive just received has the payback for the years 2013/14 2014/15 ESA im not sure what about 2015/16