HMRC Tax Rebate on Universal Credit

calcotti

mineral68 wrote: »

Who is right on income tax: HMRC or McVey at the DWP?

As an aside it's now Amber Rudd in change of DWP. She is the third Secretary of State at the DWP in 2018 - that's another great help at consistent policy making!

Cassie142

My husband died 6 weeks ago and I have been sent a cheque for a tax rebate on his tax account. Universal credit have not paid me any money for December, would my husbands tax rebate count as income?

calcotti

Cassie142 wrote: »

My husband died 6 weeks ago and I have been sent a cheque for a tax rebate on his tax account. Universal credit have not paid me any money for December, would my husbands tax rebate count as income?

The tax rebate is part of his estate and if the estate has not yet been distributed the money is not yet yours so should not yet be taken into account at all.

When the estate is distributed the amount you receive will be capital rather than income.

mineral68

A further interesting thing about income tax refunds and UC is that UC normally takes into account income AFTER income tax (and NI) deductions (if applicable), but with income tax refunds this is not income after an income tax deduction, but is an income tax refund. I know that UC legislation is the legislation and for the moment that is that, but I intend to push my MP to get in touch with Ms Rudd to ask her to justify all this, and particularly why all other income that is non-taxable is not deducted from UC payments, but only a income tax refund (which is non-taxable) is deducted.

mineral68

The following calculation briefly shows how counting an income tax refund as earned income for UC EFFECTIVELY (in practice) has the consequence of reducing the National Living Wage (NLW) for an employee.
£11850 = personal allowance.
Someone working 40 hours a week at £7.83 =£313.00.
313-228 =£85.00 which is subject to 20% income tax = £17.00 per week deduction.
If a person worked 12 weeks of a year at the NLW doing a 40 hour week that would equal £3756.00 before tax and £3552 after tax = £204.00 tax paid.
That person should then receive that £204 income tax back as an income tax refund.
But then if they claim UC when they get that refund they will loose 67% of that refund.
This has the EFFECT of reducing the workers' hourly rate BELOW the NLW.
I know that UC legislation has made this so, but then why does the Government state it has a commitment to ensuring that everyone gets paid (and implicitly gets to keep) the NMW/NLW?
It proves that UC is NOT making work pay, but is making work pay BELOW the legal NMW/NLW.

mineral68

Whether anyone agrees with my analysis of how UC may actually reduce the National Living Wage, what is completely irrefutable is the fact that low paid temporary workers are now often being deceitfully denied their full personal tax allowance of £11885 through the unfair Universal Credit system. A Tory MP who is earning £70,000 per year gets to keep their full personal tax allowance, but someone who is earning 7,000 per year as a temporary worker (and paying emergency tax) gets a significant part of their personal tax allowance removed through the UC system.

mineral68

I have made a fresh claim for UC today and the assessment period begins from today (the date the claim was made) and NOT a previous assessment period in another claim. That is the fact of the matter, whether anyone agrees with it or not.

2dareis2do

This is my 2 cents. On the .gov website it states how your earnings affect your payments. This is some what misleading as it should state how income affects your payments.

"How your earnings affect your payments

If you’re employed, how much Universal Credit you get will depend on your earnings. Your Universal Credit payment will reduce gradually as you earn more - for every £1 you earn your payment reduces by 63p.

There’s no limit to how many hours you can work."


what is should say is:

"How your income affect your payments

How much Universal Credit you get will depend on your income. Your Universal Credit payment will reduce gradually depending on your income - for every £1 of income your payment reduces by 63p.

There’s no limit to how many hours you can work."

Icequeen99

2dareis2do wrote: »

This is my 2 cents. On the .gov website it states how your earnings affect your payments. This is some what misleading as it should state how income affects your payments.

"How your earnings affect your payments

If you’re employed, how much Universal Credit you get will depend on your earnings. Your Universal Credit payment will reduce gradually as you earn more - for every £1 you earn your payment reduces by 63p.

There’s no limit to how many hours you can work."


what is should say is:

"How your income affect your payments

How much Universal Credit you get will depend on your income. Your Universal Credit payment will reduce gradually depending on your income - for every £1 of income your payment reduces by 63p.

There’s no limit to how many hours you can work."

That would also be incorrect because the 63p taper doesn't apply to unearned income - that would be subject to a £1 for £1 loss.

IQ

mineral68

Universal Credit Regulations 2013 paragraph 55 (4A) states:

'A repayment of income tax or national insurance contributions received by a person from HMRC in respect of a tax year in which the person was in paid work is to be treated as employed earnings unless it is taken into account as self-employed earnings under regulation 57 (4).'


And then the following in response to a freedom of information request I made to the DWP about income tax refunds when claiming Universal Credit:


'Repayments of Income Tax and National Insurance contribution repayments add to people's financial resources, so they need to be taken into account in calculating Universal Credit.'


It would appear that the DWP are operating a policy that is clearly discriminatory: employed people are being discriminated against compared to self-employed people.

I have asked the DWP to explain why an income tax refund does not contribute to a self-employed person's financial resources. I see a legal challenge on the grounds of discrimination. A lot of people could be due a lot of money back from this Government.