Unversal credit and tax rebate

Kim1119

Hello, im new to this so I hope I'm in the right place. We have been claiming universal credit as a family for a few months now due to my partner losing his job, self employed. We have no savings but my partner has had a tax rebate that is higher than our monthly benefit amount by about 2 months and a half. From what we have read it looks like we will have to declare this and they will stop our universal credit payment money. What we are trying to find out is if we definitely do have to declare it? Will it effect our money for just the 1 months payment or a for few months untill the amount they normally give us monthly adds up to how much he has received in the tax rebate if that makes sense. Trying to find out theses questions has been a nightmare and even unversal credit said they dont know they are only coaches. We just find it weird as people can have savings up to 16k and still claim benefits so we are a little confused. Has anyone been through this that knows the out come? If theres already a similar link created sorry i couldn't find it could anyone please tag the link below. Thank you. 

Spoonie_Turtle

Yes you have to declare it, unfortunately. I believe it's treated as income, so if you have a work allowance that would apply.

There are surplus earning rules for whether it affects subsequent UC payments but I think the disregard is currently still £2500. If you look up 'surplus earnings UC' you should find clearer info and can work out based on your max UC entitlement and the total of the rebate.

calcotti

You must declare it. It is treated as earned income. Given what you have said about the amount being two and a half times your UC amount it appears unlikely to affect more than one month of UC but it does depend on the amounts involved and how your UC claim is made up. If you are willing to post details of your UC award and how it is made up and the size of the rebate I can provide more detailed information. Otherwise you can read this https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/self-employment/surplus-earnings-and-losses/ (although it's headed self employment the surplus earnings calculation is the same).

By way of example:
If your UC entitlement is say £1,200/month, you are not entitled to a Work Allowance and you receive a rebate of £3,000.
Your nil UC threshold (the amount of earnings that would result in no UC payable) is £1,904.76. The rebate results in no UC payable in the month the rebate is received. There are 'surplus earnings' of £1,095.24. These are taken forward to the next month but there is a £2,500 disregard so they are ignored and full UC is payable.

If your UC entitlement is say £1600/month, you are not entitled to a Work Allowance and you receive a rebate of £4,000.
Your nil UC threshold is £2,539.68 The rebate results in no UC payable in the month the rebate is received. There are 'surplus earnings' of £1,460.32. These are taken forward to the next month but there is a £2,500 disregard so they are ignored and full UC is payable.

Icequeen1

calcotti said:

You must declare it. It is treated as earned income. Given what you have said about the amount being two and a half times your UC amount it appears unlikely to affect more than one month of UC but it does depend on the amounts involved and how your UC claim is made up. If you are willing to post details of your UC award and how it is made up and the size of the rebate I can provide more detailed information. Otherwise you can read this https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/self-employment/surplus-earnings-and-losses/ (although it's headed self employment the surplus earnings calculation is the same).

By way of example:
If your UC entitlement is say £1,200/month, you are not entitled to a Work Allowance and you receive a rebate of £3,000.
Your nil UC threshold (the amount of earnings that would result in no UC payable) is £1,904.76. The rebate results in no UC payable in the month the rebate is received. There are 'surplus earnings' of £1,095.24. These are taken forward to the next month but there is a £2,500 disregard so they are ignored and full UC is payable.

If your UC entitlement is say £1600/month, you are not entitled to a Work Allowance and you receive a rebate of £4,000.
Your nil UC threshold is £2,539.68 The rebate results in no UC payable in the month the rebate is received. There are 'surplus earnings' of £1,460.32. These are taken forward to the next month but there is a £2,500 disregard so they are ignored and full UC is payable.

I don't think your examples are correct. The nil UC threshold is only the first part of the surplus calculation. You then need to add the £2,500 to get the relevant threshold - 5039.68 - so income of £4k wouldn't create any surplus. The 2,500 is used when working out the surplus created on the old award (called the original surplus in the legislation). It isn't taken into account as you describe. It isn't a disregard, it is a de-minimis. 

calcotti

Icequeen1 said:

.... You then need to add the £2,500 to get the relevant threshold - 5039.68 - so income of £4k wouldn't create any surplus. The 2,500 is used when working out the surplus created on the old award (called the original surplus in the legislation). 

This is only terminology. I didn’t use the official terms of relevant threshold and de minimum amount, because I don’t think they help in explaining it, but that is the calculation I have described.

Nil UC threshold £2,539.68 in the example, therefore £1,460.32 carried forward, this is less than the de minimise amount (which is a disregarded amount) leaving nothing to be taken into account. Therefore full UC payable in the month after the rebate is received, as I said.

however you phrase it what the calculation amounts to is 
work out the nil UC threshold. Deduct it from the original sum received. Deduct a further £2500. Any positive amount left over is taken into account, in the examples I gave this is nil.

Icequeen1

calcotti said:

Icequeen1 said:

.... You then need to add the £2,500 to get the relevant threshold - 5039.68 - so income of £4k wouldn't create any surplus. The 2,500 is used when working out the surplus created on the old award (called the original surplus in the legislation). 

This is only terminology. I didn’t use the official terms of relevant threshold and de minimum amount, because I don’t think they help in explaining it, but that is the calculation I have described.

Nil UC threshold £2,539.68 in the example, therefore £1,460.32 carried forward, this is less than the de minimise amount (which is a disregarded amount) leaving nothing to be taken into account. Therefore full UC payable in the month after the rebate is received, as I said.

however you phrase it what the calculation amounts to is 
work out the nil UC threshold. Deduct it from the original sum received. Deduct a further £2500. Any positive amount left over is taken into account, in the examples I gave this is nil.

But Surplus earnings are not triggered in the examples you give, whereas you are saying there are surplus earnings that are carried forward and then covered by a disregard. It might give the same result but it is a confusing way to explain it if in reality surplus earnings don't come into it at all (would need to think about if it will in all cases and if it is just down to terminology). 

calcotti

Ice queen, I really don’t want an extended discussion about terminology. I agree that I haven’t used the legislative terminology in my explanation. The point is that UC contains the concept of surplus earnings. This means that when earnings are received there may be some earnings to carry forward which could reduce the next UC payment also and there is a calculation method that determines whether they are taken into account. We both agree that for the examples I gave no UC is payable for the assessment period in which the rebate is received but full UC is payable the following month. We have done the same calculation but described it differently.

A more correct way for me to set out my examples would be to say:

If your UC entitlement is say £1,200/month, you are not entitled to a Work Allowance and you receive a rebate of £3,000.
Your nil UC threshold (the amount of earnings that would result in no UC payable) is £1,904.76. The rebate results in no UC payable in the month the rebate is received.
For the following month UC have to determine whether to take any of the rebate into account. To do this they take the nil UC threshold and add a de minimise amount of £2,500 to establish a ‘relevant  threshold’. If the total earnings (rebate) received in that first month are above the relevant threshold the excess amount is taken into account. This is known as surplus earnings.
In the case of UC entitlement of £1,200 with a nil UC threshold of £1,904.76 the relevant threshold is therefore £3,404.76. As the original income of £3,000 is less than the relevant threshold there are no surplus earnings to take into account in that second month.

If your UC entitlement is say £1,600/month, you are not entitled to a Work Allowance and you receive a rebate of £4,000.
The nil UC threshold is £2,539.68. The rebate results in no UC payable in the month the rebate is received. 
The relevant threshold is now £5,039.68.
The original income of £4,000 is below the relevant threshold so there are no surplus earnings to take into account and full UC is payable in the month after the payment is received.

I really wasn’t too concerned with being technically precise, just with trying to give OP information on how his award might be affected. Although I described it differently the calculation was effectively the same.

Calculate: 1. Work out the nil UC threshold. 2. Subtract the nil UC threshold from the earnings received. 3. Subtract a further £2,500, if there is anything left this is taken into account the following month. E - N - 2500

Calculate: 1. Work out the nil UC threshold. 2. Add £2500 to calculate the relevant threshold. 3. Subtract the relevant threshold from the earnings received, if there is anything left this is taken into account the following month. E - (N + 2500)

Mathematically these calculations are the same.

Icequeen1

Fair enough and thanks for explaining, i wasn't raising an issue about the terminology - i genuinely thought that the way you had calculated, although giving the same result in that case, wouldn't in a more complex case. 

calcotti

The treatment of tax rebates is one of the things I object to most strongly in UC. The argument for the way it is treated is that if the claimant was on UC at the time the tax was deducted they would have got more UC then so the treatment of the tax rebate simply corrects the overall benefit amount. This argument ignores the fact that this situation most often arises when someone has had a drop in income resulting in the tax rebate, this same drop is often also why they have come onto UC and they were not receiving it at the time the tax as deducted. It means that someone who has overpaid tax still has 63% of the overpaid amount taken away from them even though the tax was never owed in the first place. 

For older benefits tax rebates were ignored as income but were taken into account as capital. For most claimants this meant a tax rebate had no impact on their benefit entitlement.

The change was clearly a deliberate policy decision made by the Conservatives who invented UC.