ESA & TAX — Scope | Disability forum
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ESA & TAX

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sheZZa
sheZZa Community member Posts: 259 Pioneering
in Employment and Support Allowance (ESA)
I have successfully claimed the Severe Disability Premium on ESA (the award letter came yesterday.) Today I have received a letter saying that I now have to pay tax and owe £600 for 2020/21. I have been on Income Related ESA since 2016 and have never paid tax. Does anyone have any idea why I would start paying tax now? TIA. 

PS. I receive an occupational pension of £25 per month which is deducted from my ESA. 
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  • calcotti
    calcotti Community member Posts: 10,010 Disability Gamechanger
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    If your RSA is a mix of contribution based ESA and income based ESA then the contribution based part is taxable. However getting the SDP would make no difference to the tax liability.

    The letter about tax is presumably from HMRC. Does it not contain a calculation showing how they calculate the tax liability has arisen?
    Information I post is for England unless otherwise stated. Rules may be different in other parts of UK.
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  • atlas47
    atlas47 Community member Posts: 238 Pioneering
    edited June 2021
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    Hi @sheZZa

    Your tax liability does not appear correct, based on your benefits and occupational pension.

    The starting point is the tax allowance, which is currently £12500.

    You need to add your taxable income, to see how much is above the £12,500 threshold.

    Another point,  if you owe HMRC tax from a previous tax year, they would adjust  your
    tax code accordingly. It could be a scam, so beware!!

    Keep us informed.
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  • sheZZa
    sheZZa Community member Posts: 259 Pioneering
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    @calcotti
    The letter is from the Employment Support Allowance office who pays my award. There is no breakdown of anything. It just says to write within 60 days if I do not agree with the decision.
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  • sheZZa
    sheZZa Community member Posts: 259 Pioneering
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    @atlas47
    My income is under £12500 as I only receive Enhanced PIP and housing benefit which are both not included,  Employment Support Allowance and my occupational pension so my income is under £12500. The letter seems genuine as I informed them of a change of circumstances last week and it’s says this. If I do not agree I have to write to them within 60 days?
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  • woodbine
    woodbine Community member Posts: 11,614 Disability Gamechanger
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    Tax owed for 2020/21 of £600 would suggest an income of approx £15,500
    Any letters regarding tax should be from HMRC not DWP, so please proceed with caution.
    2024 The year of the general election...the time for change is coming 💡

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  • sheZZa
    sheZZa Community member Posts: 259 Pioneering
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    @woodbine
    the letter has my NI number on it. It is saying that the contributory element can count as taxable income.   I am on income related esa and have been since 2016 when I was medically dismissed from my employment. I have never been on contributory esa and my current income isn’t enough to be taxed. There’s always an issue with something! 
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  • calcotti
    calcotti Community member Posts: 10,010 Disability Gamechanger
    edited June 2021
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    Your ESA is possibly a mix of contribution based ESA and income based ESA. If you had been in regular employment prior to claiming you would have been entitled to contribution based and if you have been in the Support Group ever since you will still be getting it.

    Are you willing to post exactly what the letter says in respect of tax and what it says about the £600 you referred to in your opening post.
    Information I post is for England unless otherwise stated. Rules may be different in other parts of UK.
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  • sheZZa
    sheZZa Community member Posts: 259 Pioneering
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    @calcotti
    I’m happy to post but don’t know how to so will type it out.

    We are writing to tell you that the contributory element of employment and support allowance can count as taxable income.
    Because of changes in the allowance paid to you the revised figure for taxation purposes are:
    Period ending tax year 2020/21 -
      Tax allowance paid £6845.75
      Taxable allowance £6235.64
    if you think the amount of taxable allowance is wrong, you should write to this office giving your reasons. You must do this within 60 days of this letter, as you cannot change it afterwards. 
    Keep this letter to help you fill in any tax return.
    We will answer any questions about how we calculate taxable allowance, and your Tax Office will help you with any other taxation questions. 

    I have never been informed that I should pay tax and never have since I first claimed in 2014. My income is under the £12,500 that you are allowed to earn before paying tax. I am on the higher rate of PIP and also get housing benefit, both of which are not means tested. 
    From the 4.3.21 I was awarded the severe disability element of esa (I’m a single person). So with my £25 per month pension which is deducted from my esa,  as from 28.4.21 I will be receiving £197.60 per week which totals £10275.00 per year and is under the £12500 tax allowance. 

    I’m confused. Thanks for your help and understanding x

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  • calcotti
    calcotti Community member Posts: 10,010 Disability Gamechanger
    edited June 2021
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    sheZZa said:
    Because of changes in the allowance paid to you the revised figure for taxation purposes are:
    Period ending tax year 2020/21 -
      Tax allowance paid £6845.75
      Taxable allowance £6235.64
    if you think the amount of taxable allowance is wrong, you should write to this office giving your reasons. 
    I agree that is very unclear. I don’t know what it does means but I don’t think it is saying you owe tax. If I had recently bed then I would ring ESA and ask see if someone could explain it to me.
    Information I post is for England unless otherwise stated. Rules may be different in other parts of UK.
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  • sheZZa
    sheZZa Community member Posts: 259 Pioneering
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    @calcotti
    The DWP make everything so stressful. Thank you for your advice x
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  • calcotti
    calcotti Community member Posts: 10,010 Disability Gamechanger
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    calcotti said:.. If I had recently bed then I would ring ESA ..
    Fat fingers and autocorrect! Should say If I had received that
    Information I post is for England unless otherwise stated. Rules may be different in other parts of UK.
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  • sheZZa
    sheZZa Community member Posts: 259 Pioneering
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    @calcotti I guessed what you meant ? 
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