Received lump-sum - Don't Know What To Do - Tax/Benefits Questions

billymitch

Hello everyone,

I'm hoping some kind soul can give me some advice that I urgently need.  I'm currently on benefits and receive ESA (Contribution-Based) and husband receives Child Benefit.  I've received a large lump-sum of £55K from my previous employer.  I won't go into much details, but it's been owed due to loss of job.  The income was fully taxed at source (0T Tax Code) before payout, so the £55K is after tax. 

Here's where I'm not sure what to do.  I know of course, I have to stop all benefits, but my questions are related to the ESA (Contribution-Based) and husband receives Child Benefit and what we need to do with regards to completing tax returns.

1. Do we need to do a self-assessment, if so how and when?
2. What do we do with the Child Benefit, i.e do we cancel it or leave it and include it in the self-assessment i?
3. Other than the lump-sum, what other income do we need to include in the self-assessment tax return?
4. The lump-sum has already been taxed at source, but when completing a self-assessment, do we put it as Gross or Net?

Thanks so much for your help.

Dazed_and_C0nfused

1.  "We" don't do Self Assessment.  As you are in a Child Benefit receiving family and have (adjusted net) income greater than £50k you will need to complete a Self Assessment return.  I'm assuming here that this is more than your husband's income.  For your husband it will depend on whether he meets the rules to complete a return.

2.  Even if you cancelled it you would still have to include what had been received so far this tax year on the return.  If the likelihood of having to pay it back is for one tax year only then not sure why you are considering cancelling it or is there more to this than you have said?

3.  All taxable income, earnings, self employment, taxable benefits from DWP (ESA can be taxable), interest, dividends etc

4.  You include the taxable amount not the amount after tax.  You also include the tax deducted so you get credit for that in your Self Assessment calculation.

You need to register by next October (at the latest, no need to wait until then) and pay any tax/HICBC due by 31 January 2023.

billymitch

Dazed_and_C0nfused said:

1.  "We" don't do Self Assessment.  As you are in a Child Benefit receiving family and have (adjusted net) income greater than £50k you will need to complete a Self Assessment return.  I'm assuming here that this is more than your husband's income.  For your husband it will depend on whether he meets the rules to complete a return.

2.  Even if you cancelled it you would still have to include what had been received so far this tax year on the return.  If the likelihood of having to pay it back is for one tax year only then not sure why you are considering cancelling it or is there more to this than you have said?

3.  All taxable income, earnings, self employment, taxable benefits from DWP (ESA can be taxable), interest, dividends etc

4.  You include the taxable amount not the amount after tax.  You also include the tax deducted so you get credit for that in your Self Assessment calculation.

You need to register by next October (at the latest, no need to wait until then) and pay any tax/HICBC due by 31 January 2023.

Thanks so much for your prompt reply Dazed.

1. Both of us prior to receiving this lump sum are unemployed, so other than benefits, there isn't any other income.  What rules are you referring to Dazed?

2. Forgive me, but I'm not sure what you mean by this.  He's been receiving CB for our children, but from what little knowledge I've gathered, I'm trying to find out whether the child benefit needs to be stopped due to the income now going over the £50K threshold or do we leave it as is?

3. THANKS! - Do we include any assets, such as our home that we live in?

4. THANKS! - The lump-sum was taxed at 0T rate, but I was told that I can claim a tax-rebate on this later - How do I go about doing this and when?

Really appreciate your help.

Dazed_and_C0nfused

1.  There are criteria for who is meant to complete Self Assessment returns, one being if HICBC is due.  But if he is unemployed with his only taxable income being (DWP) benefits and this hem s less than your income then he won't need to complete one.

2.  No one eligible for it ever needs to stop receiving Child Benefit.  But if your adjusted net income is high enough then you will have to pay some or all of it back via the High Income Child Benefit Charge.  From what you have posted though this seems to be something that will only happen for one year so I'm not sure why you think stopping Child Benefit is worthwhile?  It won't stop you needing to complete at least one Self Assessment return.

3 & 4.  You're welcome

NB.  If you post details of what you think your total taxable income might be then there may be a way to reduce the tax you have to pay and any HICBC.

Grumpy_chap

billymitch said:

I've received a large lump-sum of £55K from my previous employer.  I won't go into much details, but it's been owed due to loss of job.  The income was fully taxed at source (0T Tax Code) before payout, so the £55K is after tax. 

There is no need for you to share details, but the details can make a difference to how this all affects things.

If any of that £55k was redundancy, then up to £30k is usually not taxable.  £30k tax free plus £25k after tax is quite a different gross income from £55k after tax where it was all taxable.

I also do not know how redundancy payments are treated for the purposes of HICBC, they may not be considered in this context.

You may have options to "reduce" your income and / or may still be able to benefit from transfer of some of your husband's personal allowance.

There's a lot that may benefit from consideration in this mix and may assist to minimise your tax liabilities.  It is good that you are considering this now as you have time to plan before the end of the tax year.  For anyone to advise on this, you'd have to share more - if you prefer not to do so in a forum, an Accountant may be worth considering.