Incapacity benefit and TAX

Chippychap

Hi,

I'm a 52 year old married man on incapacity benefit (one of THOSE)
I also get a pension from the fire service for the same illness.
The benefit bods clip my benefit because of the pension AND the pension is taxed because of the benefit.
Is this double attack the way of the world?

dmg24

No, it means that the additional income from IB takes you above your personal allowance. I'm not sure why you would expect it to be tax free?

Chippychap

Please forgive me I obviously did not phrase my question correctly.
So BOTH departments make the adjustments?

dmg24

You would be taxed proportionately on both items, depending on how your tax allowance has been apportioned.

Chippychap

Hi dmg 24, it is not a problem if you think I am thick but.............is it right that the benefits people pay me a reduced benefit because of the pension AND when I receive my pension it has ALSO had money retained because of the benefit.
I have little faith in both departments.
So the "adjustment is made by BOTH departments?

dmg24

Is your pension being reduced because of the benefit, or are you just being taxed on your pensionable amount?

For instance, if your pension is £100 and your IB is £80, is your pension reduced to £20, or is it reduced by 20% (i.e. tax taken off)? These are not accurate figures, I'm just using them to demonstrate!

I don't think you are thick, but I'm not sure if you understand what you are asking?!

If you want to post some figures, that may help us explain? x

krisskross

Incapacity benefit is reduced if there is other income. the reduced incapacity benefit and the fire service pension are then added together to give a total income.

Personal tax free allowance is about £5.5K so any income, from whatever source, above this is taxed at 20%.

so yes you can have the Incapacity benefit reduced because of the amount of your occupational pension and you are liable for income tax on all income above your personal allowance.Because it is not possible to stop income tax on a benefit the whole of your tax liability is taken from the fire service pension.

healy

I think Krisskross has explained the situation well in their last paragraph. Just to add if you have a pension of over £85 per week this is reduced by 50p in the £1 for anything over £85 unless you receive Higher Rate Care DLA. Incapacity Benefit is not reduced by other income. So in effect you are taxed 50% on the pension and then taxed as normal on income above your personal allowance.

seven-day-weekend

My husband is in a similar position with his Teachers Pension and IB. He has some money knocked off his IB because his pension is over £85 a week. However, the pension and reduced IB still take him over his personal tax allowance so he is taxed on the surplus and it is taken off his Teachers' Pension.

Hope this helps the OP.

redimp98

I was entitled to £72 pw IB. On receiving a pension of £9k p.a (£180pw), the £85pw rule kicked in, so half of the £95 was taken off my IB, reducing it to a mere £24 pw.

It doesnt stop there, because it is subject to tax. Over a year, the tax office calculate 52 weeks x £24, lets call it £1000. Total income is £10k, now knock off the personal tax allowance of £5350, tax is paid at 20% on 4650 = £920pa = £76pm.

Gone is the lower 10% tax rate on the first £2350 of income. More serious is the treatment of people on IB. Local offices are striving to meet DWP targets re. getting people off IB and into some kind of suitable work they feel the recipient is able to do. I was called for 2 interviews. I was asked to supply proof of income, and the claim was delayed for 3 months. In that time, I posted it off 3 times, and even personally took it down to the local office. Every single time, they claimed they had never received it. I decided for £24pw less tax, it wasnt worth claiming, so I told them nicely to stuff the claim. On reply, all the "lost" documents were returned to me, with a cheque for 3 months IB benefit. On informing the tax office, at least they corrected my tax code.
God help ppl who rely on IB as their sole source of income.

dmg24

krisskross wrote: »

Incapacity benefit is reduced if there is other income. the reduced incapacity benefit and the fire service pension are then added together to give a total income.

Personal tax free allowance is about £5.5K so any income, from whatever source, above this is taxed at 20%.

so yes you can have the Incapacity benefit reduced because of the amount of your occupational pension and you are liable for income tax on all income above your personal allowance.Because it is not possible to stop income tax on a benefit the whole of your tax liability is taken from the fire service pension.

is it right that the benefits people pay me a reduced benefit because of the pension AND when I receive my pension it has ALSO had money retained because of the benefit.

Whilst krisskross is correct, it does not wholly answer what the OP is asking (or maybe the OP asked the wrong question?). The OP seems to think that his pension is being reduced due to his IB, hence my request for figures to see if he is just being taxed, or if he is actually having his pension reduced by the amount of his IB.