Tax rebate and universal credit

baconandegg

We applied for universal credit earlier this month. We've been told we start to get it mid August.  My husband has just discovered he's due a £2k tax rebate relating to the 19/20 tax year. He was self-employed. If he claims the rebate now, how will it be treated by DWP?

KatrinaWaves

Pretty sure with UC it will affect the period which it’s received in, so you may have a month where no UC is due. 

I wouldn’t have thought you could put off claiming it to get more in benefits, but I’m not an expert on that. 

calcotti

Any tax rebate will be treated as earnings for the assessment period in which it is received. This means a deduction of 63% of the amount received will made from UC (subject to any applicable work allowance). If you hope to only be on UC for a short while and can manage without the rebate he may wish to defer claiming it.

baconandegg

Thank you.

baconandegg

If he does claim it, can it be treated as part of the UC work allowance ?

calcotti

baconandegg said:

If he does claim it, can it be treated as part of the UC work allowance ?

As I said in my earlier reply the Work Allowance applies (because the rebate is treated as earnings).

calcotti said:

Any tax rebate will be treated as earnings for the assessment period in which it is received. This means a deduction of 63% of the amount received will made from UC (subject to any applicable work allowance). If you hope to only be on UC for a short while and can manage without the rebate he may wish to defer claiming it.

A_Lert

Universal Credit deem tax refunds to be income, even if the claimant wasn't claiming when they overpaid the tax. Yes it's unfair: newsflash, Universal Credit as a whole is unfair by design.

calcotti

A_Lert said:

Universal Credit deem tax refunds to be income, even if the claimant wasn't claiming when they overpaid the tax. Yes it's unfair: newsflash, Universal Credit as a whole is unfair by design.

It is important to be clear that they are treated as earned income, not unearned income, and, to my understanding, only if claimant was in work in the year to which the rebate relates.
Yes it's unfair and a deliberate policy change from legacy benefits when rebates were treated as capital.

poppy12345

A_Lert said:

 Universal Credit as a whole is unfair by design.

It's far from perfect but not everything about UC is unfair. It works well for some people and they are better off by claiming this than they were claiming legacy benefits. For example, savings, paying debt to reduce your savings when claiming UC is not classed as deprivation of capital like it was/is with some of the legacy benefits.

calcotti

poppy12345 said:

A_Lert said:

 Universal Credit as a whole is unfair by design.

It's far from perfect but not everything about UC is unfair. It works well for some people and they are better off by claiming this than they were claiming legacy benefits. For example, savings, paying debt to reduce your savings when claiming UC is not classed as deprivation of capital like it was/is with some of the legacy benefits.

To which one could add, for example,

• much lower non-dependant deductions in many cases and the fact that as they are a flat rate you don't have to provide income details for non-dependants
• no earnings allowance for carer element (unlike carers allowance)
• no earnings allowance for LCWRA element if awarded (unlike ESA permitted work)

baconandegg

After a long and complicated discussion with the Tax Credits people (which we've migrated from to UC), it looks as though the rebate could be as much as £10k. If so, we could really do with paying a chunk off our credit card debt. Will UC consider this as a reasonable use of this money? I understand that in the assessment period where he claims the rebate it will nul what we would have received in universal credit payment. But, with proof of using the money to pay debt, will we be able to carry on claiming UC?