TAX ALLOWANCE ABOVE STATE PENSION AND BENEFITS

NOWOLD

Transfer makes no differenceasbenefits are subject to household income

Marcon

Sarahspangles said:

@NOWOLD Are you expecting to receive benefits or additional benefits because you have elected to transfer some of your personal allowance to your wife?

Or is your query about how your tax will be paid as it can’t be deducted from the State Pension. Thousands of pensioners in this situation pay tax through Simple Assessment.

Deducting tax from the state pension is a red herring - but understandable that those not familiar with means tested benefits should think that's what is being asked. It isn't. Means tested benefits are typically based on net income and OP's council is basing their assessment on gross income, despite the fact that some of the pension is now taxable. That's what OP thinks is wrong.

NOWOLD

transfer makes no difference as benefits go on total household income

Sarahspangles

Marcon said:

Means tested benefits are typically based on net income and OP's council is basing their assessment on gross income, despite the fact that some of the pension is now taxable. That's what OP thinks is wrong.

Ah, get the tax bit.

Is the Council taking the position that the combined gross income of the couple is the same irrespective of how they have allocated the personal allowance between them? As the benefit assessment is joint.

NOWOLD

Sarahspangles said:

Is the Council taking the position that the combined gross income of the couple is the same irrespective of how they have allocated the personal allowance between them? As the benefit assessment is joint.

Yes but benefits are based on NETT income

michaels

Would the same issue apply to people who had serps/s2p that took them over the personal allowance?  And potentially everyone when the triple lock takes the standard state pension over the frozen personal allowance? (We voted against the Tories who were offering to prevent this)

sheramber

NOWOLD said:

Sarahspangles said:

Is the Council taking the position that the combined gross income of the couple is the same irrespective of how they have allocated the personal allowance between them? As the benefit assessment is joint.

Yes but benefits are based on NETT income

And your husband’s net earnings are lower because of the transfer of balance of allowances so it balances out between you. 

In fact he could be benefitting by more than you are losing. 

michaels

sheramber said:

NOWOLD said:

Sarahspangles said:

Is the Council taking the position that the combined gross income of the couple is the same irrespective of how they have allocated the personal allowance between them? As the benefit assessment is joint.

Yes but benefits are based on NETT income

And your husband’s net earnings are lower because of the transfer of balance of allowances so it balances out between you. 

In fact he could be benefitting by more than you are losing. 

I think the issue is that whilst they are supposed to be based on net, they are being calculated based on gross because this is what HMRC are reporting to the benefits givers because by default state pensions are paid gross with any tax liability being taken later.

NOWOLD

michaels said:

I think the issue is that whilst they are supposed to be based on net, they are being calculated based on gross because this is what HMRC and reporting to the benefits givers because by default state pensions are paid gross with any tax liability being taken later.

EXACLY THAT

Nebulous2

NOWOLD said:

michaels said:

I think the issue is that whilst they are supposed to be based on net, they are being calculated based on gross because this is what HMRC and reporting to the benefits givers because by default state pensions are paid gross with any tax liability being taken later.

EXACLY THAT

Does it matter? If my calculations are right, then you will only be paying around £130 a year in tax. Does that extra £130 you wont receive take you over a threshold for receiving benefits? 

Isn't the full state pension on its own over the pension credit limit? 

Then there is the argument that it is a voluntary situation. Giving up part of your allowance to pay tax and bring you under a threshold for benefits seems contrived. 

The same situation could apply to people repaying tax from previous years through their tax code. If somebody had underpaid their tax, had their code reduced to pay a deficit from previous years, would we expect them to then get means tested benefits?