ESA with disability element to be taxed- HELP

ladyahha

I became a pensioner on 24th March this year and received a letter from Job Centre stating £5909.10 of my ESA for the tax year 2022/23 would be added to this current tax year.  I truly don't underestand how they can take over half of my last years ESA to add to this year for tax.  I can't seem to get any straight answers from them,  I have a 60 day deadline to send in a letter saying why I disagree.  PLEASE PLEASE PLEASE can anyone help ???

Newcad

Benefits are taxable, that's why you get a P60U form the DWP each year. (At least you should do).

But the 'Beneftit year' and the 'Tax year' are not inline with each other.
A Benefit Year starts on the 1st of January, A Tax year starts on the 6th of April.

It's most usually seen when working out entitlement to a Contributions Based benefit, ie, you must have made sufficent NI contributions in the 2 full tax years preceding the current benefit year.
So say you claim a benefit in March 2023 the relevent full tax years would be 2020/21 and 2021/22

But it can affect other things too.
Read the letter again and see if it makes more sense now that you know that the two things start on different dates.

Bear in mind that you became a pensioner in tax year 2022/23 not tax year 2023/24.

Also check the date that the letter refers to, if/when it says 'current tax year' it may actually mean 2022/23 tax year which is when you became a pensioner but has now ended.

Dazed_and_C0nfused

ladyahha said:

I became a pensioner on 24th March this year and received a letter from Job Centre stating £5909.10 of my ESA for the tax year 2022/23 would be added to this current tax year.  I truly don't underestand how they can take over half of my last years ESA to add to this year for tax.  I can't seem to get any straight answers from them,  I have a 60 day deadline to send in a letter saying why I disagree.  PLEASE PLEASE PLEASE can anyone help ???

Can you explain exactly why you think that?

ladyahha

I've never had to pay tax before on my benefit.  The benefit stopped on 23rd March.  It definitely reads they are taking it from 2022/2023 and adding to my income for the tax year 2023/2024.  I'm totally confused by the whole letter from the Job Centre.  My private pension started on 24th and I was taxed on that from that date to the end of 22/23 tax year which I totally expected.

The fact they want to use over half of my ESA from before my pension age doesn't make any sense to me at all and I haven't been able to find any answers. 

Dazed_and_C0nfused

ladyahha said:

I've never had to pay tax before on my benefit.  The benefit stopped on 23rd March.  It definitely reads they are taking it from 2022/2023 and adding to my income for the tax year 2023/2024.  I'm totally confused by the whole letter from the Job Centre.  My private pension started on 24th and I was taxed on that from that date to the end of 22/23 tax year which I totally expected.

The fact they want to use over half of my ESA from before my pension age doesn't make any sense to me at all and I haven't been able to find any answers. 

The Job Centre aren't responsible for tax though, HMRC are.

As with most things tax related the detail is important.

Can you reproduce exactly what this letter says as I suspect you have either misunderstood or it's badly worded.

Newcad

Without seeing the letter it's hard to comment sensibly.

The way that DWP letters is written is often very confusing.

You are best contacting a local advice agency who can see the letter and explain it (if they can).

 Put your postcode in here to find local advisors: https://advicelocal.uk/

ladyahha

I think you're right I have misunderstood the letter as I only received it on 18th April, letter is dated 24 March.  This is the paragraph I think I have misunderstood ' For the period up to 23 March 2023 in the 2022/2023 tax year we paid a total allowance of £10298.09. of which £5909.10 was taxable.  This is added to any earnings for this tax year.'  
As I received it in April I thought it meant this current tax year, now reading it again I think it was for tax year 2022/2023, your comments would be really appreciated.  Thank you in advance for your time.

Dazed_and_C0nfused

ladyahha said:

I think you're right I have misunderstood the letter as I only received it on 18th April, letter is dated 24 March.  This is the paragraph I think I have misunderstood ' For the period up to 23 March 2023 in the 2022/2023 tax year we paid a total allowance of £10298.09. of which £5909.10 was taxable.  This is added to any earnings for this tax year.'  
As I received it in April I thought it meant this current tax year, now reading it again I think it was for tax year 2022/2023, your comments would be really appreciated.  Thank you in advance for your time.

Nothing there suggests it will be taxable in 2023-24.

The £5909 will no doubt be taken into account when checking your 2022-23 tax position.

unforeseen

Based on the fact that op is now getting state pension then the additional 5900 will result in some tax being paid (assuming full state pension being received) and will be taken off the ESA  as the pension is paid gross. 

Newcad

ladyahha said:

I think you're right I have misunderstood the letter as I only received it on 18th April, letter is dated 24 March.  This is the paragraph I think I have misunderstood ' For the period up to 23 March 2023 in the 2022/2023 tax year we paid a total allowance of £10298.09. of which £5909.10 was taxable.  This is added to any earnings for this tax year.'  
As I received it in April I thought it meant this current tax year, now reading it again I think it was for tax year 2022/2023, your comments would be really appreciated.  Thank you in advance for your time.

Yes, where it says "... earnings for this tax year." then that is the tax year 2022/2023.

When you reached State Pension age on 24th March your ESA stopped.
So that letter is telling you your final taxable position for the ESA that was paid up until 23rd March, which was all in tax year 2022/2023.
(As only £5909.10 was taxable then unless you have other taxable income it's well within your personal allowance so no tax is due).

The confusion has arisen because by the time they calculated it and you got that letter that tax year had ended.

We are now in tax year 2023/2024 and you will be taxed as a pensioner with no ESA in the calculation because you no longer qualify for ESA now that you are above State Pension Age.

Albermarle

If you are receiving state pension and a private pension in 23/24 ( which it sounds like you are) then anything above £12570 will be taxed at 20% ( £12,570 being the standard personal tax allowance that everyone gets in most circumstances)