Tax money set aside

philpenn123

I have an ISA and I put my tax money in it because my accountant said it was OK, set it aside during lockdown. The amount was over £16,000.00 I am self employed, The Universal credit said I was not entitled to Universal credit as I had over £16,000.00 But a web page on martin lewis said he spoke to UC and they said it is ok to set aside the funds to pay tax without interfering with my UC payments. The denied this and requested I pay it all back £8,000.00, is it not true what Martin Lewis put.

Alice_Holt

Look at:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1062001/admh2.pdf

I think it would fall under business assets, and therefore should be ignored in the calculation of your savings.
Presumably the ISA is instant access cash ?

You should challenge the UC decision, ask for a mandatory reconsideration of their decision:
https://www.citizensadvice.org.uk/benefits/universal-credit/problems-with-your-payment/challenging-a-universal-credit-decision-mandatory-consideration/

Provide proof of the self employed tax due.
Continue to appeal if UC don't change their decision.

NedS

Did you declare the money in the ISA when you made your claim, and did you explain that it is put aside to pay a tax bill? Did a decision maker make a decision to disregard it on this basis? If not, then because you failed to declare it DWP will likely treat it as personal savings when they find out, as has happened here.

When you do not clearly separate your personal assets from your business assets, it complicates matters as is the case here. You will need to provide evidence to show how much of the ISA was put aside to pay your tax bill and how much of the ISA was personal savings. How much was your tax bill and when did you pay it? Did you declare the savings you had that were not put aside for the tax bill (assuming the whole ISA was not for tax bill purposes)?

Alice_Holt

NedS said:

Did you declare the money in the ISA when you made your claim, and did you explain that it is put aside to pay a tax bill? Did a decision maker make a decision to disregard it on this basis? If not, then because you failed to declare it DWP will likely treat it as personal savings when they find out, as has happened here.

When you do not clearly separate your personal assets from your business assets, it complicates matters as is the case here. You will need to provide evidence to show how much of the ISA was put aside to pay your tax bill and how much of the ISA was personal savings. How much was your tax bill and when did you pay it? Did you declare the savings you had that were not put aside for the tax bill (assuming the whole ISA was not for tax bill purposes)?

        Good point.

      OP - what information did you give to UC about your savings?

       What steps have you taken to inform / challenge UC ?

kaMelo

What type of self employment best describes your business,  sole trader or limited company?

sheramber

https://www.moneysavingexpert.com/news/2020/04/self-employed-with-cash-saved-to-pay-tax--it-won-t-be-counted-as/

What the Government says

A DWP spokesperson said: "Most commonly, we would expect people to have business assets in a business account, including savings for tax liability, which would not be counted towards their capital limit."

"However, if someone has money in their personal account that is to be used for business purposes, it will not be counted towards their capital, but they may be asked to prove that the money is for business purposes.

"People should make clear in their application the savings that are business assets, and note it in their online journal."

So if you've savings set aside to pay tax, put a note of this in your online universal credit journal and tell them when they call, and it should be discounted from the calculations. For more info, see Help claiming universal credit.

Did you follow this advice?

sammyjammy

Why do I get the feeling OP will not return and has no evidence that this £16k, which just happens to be the savings limit, is for tax due.  That's an awful lot of profit in a business if OP is self employed and claiming UC.

philpenn123

Hi many thanks for your comments, I showed them the Tax bill I owed, an Accountants email requesting I set aside the funds to pay tax, and ISA is OK, a copy of the bill from Inland revenue, the funds taken out of the ISA to pay the tax and still they say because it is more than 16,000,00 I can use the money for anything such as a tax bill cannot be taken into account. The Tax was paid. The original tax bill was £21,000.00 you have to pay 50% for the next year on account that's why it looks a lot. 

calcotti

Request a Mandatory Reconsideration If you wish to pursue it.

In future try and keep personal funds and business funds separate.

Grumpy_chap

Are all the funds in the ISA for tax set-aside?
Does that sum align with the profits / earnings / income reported to UC during the year?

If I read this thread correctly, OP has £21k in the bank for the income tax set-aside.
OP is self-employed sole-trader.
If all the money is for income tax, and assume it is first year, so the money is the tax due now plus on account for next year.  The £21k is tax due for two years.
So, £10k tax due for one year.
Personal allowance £12.5k no tax, then go up to 50k (£37.5k) at 20% which uses £7.5k tax.
That leaves £2.5k tax at 40% rate so another £6k earnings.
Total earnings / taxable income / profits around £56k

UC is complex and there are cases where income can be higher and entitlement remains, but the DM will possibly be assessing the amount set aside for tax liabilities as how that compares to reported income.

If I have mis-understood the comments from the OP, then the reverse calculation of earnings level could be incorrect and the potential query about tax set-aside matching reported earnings could well become irrelevant.

The other possible reading is that the tax set-aside is £21k - £16k = £5k which will equate to a far lower earnings / profit level but leaves £16k of personal savings so means no UC.  It is an alternative reading of the thread, but probably does not help the OP.

NedS

Grumpy_chap said:

Are all the funds in the ISA for tax set-aside?
Does that sum align with the profits / earnings / income reported to UC during the year?

If I read this thread correctly, OP has £21k in the bank for the income tax set-aside.
OP is self-employed sole-trader.
If all the money is for income tax, and assume it is first year, so the money is the tax due now plus on account for next year.  The £21k is tax due for two years.
So, £10k tax due for one year.
Personal allowance £12.5k no tax, then go up to 50k (£37.5k) at 20% which uses £7.5k tax.
That leaves £2.5k tax at 40% rate so another £6k earnings.
Total earnings / taxable income / profits around £56k

UC is complex and there are cases where income can be higher and entitlement remains, but the DM will possibly be assessing the amount set aside for tax liabilities as how that compares to reported income.

If I have mis-understood the comments from the OP, then the reverse calculation of earnings level could be incorrect and the potential query about tax set-aside matching reported earnings could well become irrelevant.

The other possible reading is that the tax set-aside is £21k - £16k = £5k which will equate to a far lower earnings / profit level but leaves £16k of personal savings so means no UC.  It is an alternative reading of the thread, but probably does not help the OP.

It could (conceivably) be that the OP was self employed earning a very high amount leading up to Covid and that work then abruptly ended due to lockdown, but they are not required to pay the tax bill for some time (and I believe HMRC deferred payments to further help people), so at the point of the claim, they had £21k put aside for a pending tax bill on earnings before Covid.

However, one must wonder why someone self employed earning that amount has not managed to put a little away for a rainy day and became immediately reliant on the benefits system? Lots of assumptions there on my part so maybe completely wrong.

In hindsight, the sensible thing to do would have been to settle any outstanding liabilities before making a claim for UC.