UC - AET

calcotti

Galloglass said:

This poses the question of whether the AET is indexed and to what? 

As Ned said, the AET is linked to the amount of JSA payable and as JSA is increasing it follows that the AET is rising. The FOI response you quote is old and the AET is defined in regulation. The AET figure is the figure that would result in nil entitlement to income based JSA.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/864944/admj3.pdf

“J3233 The work search or work availability requirement must not be imposed where1 the claimant has monthly earnings, or if the claimant is a member of a couple, the couple combined monthly earnings, that are equal to or more than the following amount multiplied by 52 and divided by 12

1. for a single claimant, £5 plus the applicable amount of the JSA personal allowance for a single person aged 25 or over or

2. where the claimant is a member of a couple, £10 plus the applicable amount of the JSA personal allowance for a couple where both members are aged 18 or over.

The reference amount applicable to a claimant or joint claimants is referred to as the “Administrative Earnings Threshold”.”

JSA is rising to £74.35/week for a single person and £116.80 for a couple. I therefore calculate AET will be £343.85 and £549.47.

atlantis187

Is AET based on gross or net pay?

Robbie64

atlantis187 said:

Is AET based on gross or net pay?

Gross pay.

calcotti

Robbie64 said:

atlantis187 said:

Is AET based on gross or net pay?

Gross pay.

Given that income taken into account for benefits is usually net pay would it not be net pay (although at this level I expect they’re probably the same so the answer may be immaterial).?

NedS

AET is based on net pay. All calculations in UC are based on net pay. Further, only earned income reported by an employer through RTI counts towards the AET. So, for example, unearned income (e.g, pensions) does not count, self reported or self employed earnings (not reported by RTI) do not count, and tax rebates (although treated as earned income) do not count towards the AET

Robbie64

I'd answered gross pay as this seems to be the default position that appears in any official answer such as the FOI request linked to on the previous page or in a Parliamentary depsoited paper in 2018 regarding Earnings Thresholds:

Unlike the CET, the individual / household AET are static amounts, but may be adjusted, usually in April, when benefits are uprated. Whilst both thresholds (CET & AET) are based on gross taxable pay, only employed earnings can contribute to meeting the AET (i.e. Self-employed earnings will not count towards it). For more guidance about the AET see Labour Market conditionality and regimes.

DEP2018-0759

https://www.parliament.uk/business/publications/business-papers/commons/deposited-papers/?house=1&itemId=119004&page=4&search_term=Department+for+Work+and+Pensions#toggle-759

http://data.parliament.uk/DepositedPapers/Files/DEP2018-0759/CC_-_Earnings_Thresholds_v1.0.pdf

For most people earnings at such a low rate wouldn't be taxed anyway but could it be possible that someone may have other income that takes them over the tax threshold? I can't imagine many people would be in this position but could someone, for example, be receiving earned income, Carers Allowance and an occupational pension and as a result have income above the tax threshold and still be entitled to UC. Basing AET on gross, rather than net, pay would benefit the claimant in such a circumstance.

calcotti

Robbie. The current version of the deposited paper on thresholds also refers to gross pay so gross pay it appears to be - even though that appears illogical when everything else to do with UC is based on net income and earned income is defined under UC as income net of any NI tax and pension contributions made.
http://data.parliament.uk/DepositedPapers/Files/DEP2019-0980/2._Administrative_and_Conditionality_Earnings_Thresholds_v3.0.pdf

Robbie64

I'm guessing it's for the (highly unlikely) scenario that I outlined that someone may be taxed on their earned income of around £541 a month and therefore would be at a disadvantage if net pay took them just below the AET threshold.

It makes more obvious sense for CET to be based on gross pay as someone working 35 hours a week at minimum wage would be paying income tax.

calcotti

Robbie64 said:

I'm guessing it's for the (highly unlikely) scenario that I outlined that someone may be taxed on their earned income of around £541 a month and therefore would be at a disadvantage if net pay took them just below the AET threshold..

I don’t see that. The AET is defined as the amount that would result in a nil award of JSA and the calculation of JSA would be based on net income (although pension deductions may be treated differently under JSA - can’t remember).

Have just noticed too that in the deposited paper on the benefit cap it refers to the Earnings threshold in connection with earnings after tax and NI contributions. http://data.parliament.uk/DepositedPapers/Files/DEP2019-0980/16._Benefit_Cap_v15.0.pdf

atlantis187

I'm thinking of returning to work in the near future and if I was to work say 12 hours a week earning £7000 a year paying around 5.5% in pension would my pay take me above AET or not?