Which State Benefits are Taxable?

It is crucial that you know which State Benefits are taxable and which are non-taxable so that you can correctly declare your overall ‘taxable income’ to the tax office.

If you add non-taxable benefits to your total, then you will end up paying more tax than is required. Benefits that are classified as non-taxable should not be included on any tax returns or other HMRC documents that ask for ‘taxable income’.

State Benefits that are not taxable:

  • Attendance Allowance
  • Child Benefit – this one is based on your income, so you may have to pay tax on it if you earn more than the given threshold. (HMRC have a ‘Child Benefit Tax Calculator’ on their website to help you work out if this is a taxable benefit for your income bracket.)
  • Child Tax Credit
  • Disability Living Allowance
  • Employment and Support Allowance – this is also income related
  • Free TV license for over-75s
  • Guardian’s Allowance
  • Housing Benefit
  • Income Support
  • Industrial Injuries Benefit
  • Lump-sum bereavement payments
  • Maternity Allowance
  • Pension Credit
  • Severe Disablement Allowance
  • Universal Credit
  • War Widow’s Pension
  • Winter Fuel Payments and Christmas Bonus
  • Working Tax Credit
  • Young Person’s Bridging Allowance

You do have to pay income tax on the following State Benefits:

  • Bereavement Allowance
  • Carer’s Allowance
  • Employment and Support Allowance (contribution based)
  • Incapacity Benefit (from the 29th week you receive it)
  • Jobseeker’s Allowance
  • Pensions paid by the Industrial Death Benefit Scheme
  • State Pension
  • Widowed Parent’s Allowance
  • Widow’s pension

Benefits and your tax return

If you fill in a Self Assessment tax return don’t forget to include any taxable benefits. Some benefits like Job Seekers Allowance have to be included in your tax return because they are classed as a taxable benefit.

If you don’t include taxable benefits your SA tax return will be wrong and in many cases you won’t pay enough income tax.

 

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