New tax coding due to taxable Incapacity Benefit.

bgscotty

Hello,

I'd welcome a little advice.

I've just received a new tax coding for 6 April 2008 -5 April 2009.

It details:

Your personal allowance £5435
Taxable incapacity benefit - £2592
A tax free amount of £2843

Previously, while employed, I had the standard single person under 65 tax allowance.

In October 2007, I took early medical retirement from work on grounds of ill health. I am not in employment now.

I currently receive a pension of £400 per month and receive Incapacity Benefit (taxable).

Am I worse off financially because of this new tax coding?

If so, is there any solution to this?

For example, I realise that the Incapacity Benefit is taxable and it is this which has triggered off the new tax coding.

Is it a solution, and is it possible, to cancel my claim for Incapacity Benefit and would this make be better off? Or is this a stupid thing to do?

I'm grateful for advice in advance.

Thank you.

BG

[Deleted User]

Your pension is £5000 a year,you have £2843 on which you wont pay tax so your tax for the year should be 20% of £2157 which is £430 or £8 a week,i can only assume that your I/B is far far more than £8 a week,so the answer would be no.

chrisbur

bgscotty wrote: »

Hello,

I'd welcome a little advice.

I've just received a new tax coding for 6 April 2008 -5 April 2009.

It details:

Your personal allowance £5435
Taxable incapacity benefit - £2592
A tax free amount of £2843

Previously, while employed, I had the standard single person under 65 tax allowance.

In October 2007, I took early medical retirement from work on grounds of ill health. I am not in employment now.

I currently receive a pension of £400 per month and receive Incapacity Benefit (taxable).

Am I worse off financially because of this new tax coding?

If so, is there any solution to this?

For example, I realise that the Incapacity Benefit is taxable and it is this which has triggered off the new tax coding.

Is it a solution, and is it possible, to cancel my claim for Incapacity Benefit and would this make be better off? Or is this a stupid thing to do?

I'm grateful for advice in advance.

Thank you.

BG

If the pension and incapacity benefit are your only souces of taxable income then as a result of your taxable allowance dropping from £5435 to £2843 you will pay £391 tax on your pension. That is £4800 less £2843 which gives £1957 taxable income from which 20% is taken in tax.

If you have other souces of taxable income then this change of code would cause an increase in that but the maximum extra tax you would pay due to this change would be about £518.

stazi

Sorry, I don't know where taxabe IB of £2592 comes from. This would be £49pw, which is not an IB rate.

At whatever rate of IB you're on, approx £7.50pw should be being deducted by JCP because of your Occ pension.