underpaid tax on Incapacity Benefit

[moozer]

Hi all,

I could really do with some help here. Yesterday I received two letters from HM Revenue & Customs stating that I have underpaid taxes on my Incapacity Benefit for the tax years 2008-09 and 2009-10.

 

I have been in receipt of IB for approximately 9 years and this is the first time I have heard of having to pay tax on this benefit.

 

Looking back on last years P60 (substitute) that I receive yearly from jobcentreplus, it states that I have a Tax Code: NULL. I thought this meant that I was ineligible to pay taxes on this benefit, but it appears that the taxman has different ideas.

 

I am married and we have 5 children and the IB is supposed to be there to help us live on what the government tells us we have to live on. The letters from the taxman state that I now owe £380.80 for 2008-09 and £733.40 for 2009-10.

 

I am at a loss as to what to do. I've never had this before and now it seems I am liable for 2010-11 as I haven't paid this tax.

 

How am I and my family be expected to live on such a low income AND be taxed for it? I don't get it?

 

Is this right?

 

Any help is greatly appreciated.

[honeybee13]

Hello there. It sounds to me as if your tax code could have been wrong, but I need to do a bit more digging. Did you have any income at all apart from the IB and can you tell me how much they paid you each month please?

 

You're sure that 'nul' is your tax code and not the tax that was or wasn't deducted from your IB?

 

My best, HB

[honeybee13]

PS Having checked on directgov, each individual is entitled to receive £6475 this tax year without paying tax.

 

You need to work out how much taxable income/benefits you received in those tax years. I believe IB is taxable and if you had other taxable benefits in your own name, they could affect the calculations and count towards the £6475.

 

Please tell me some more if you can.

 

HB

[moozer]

Hi HB, Thanks for responding. The only other income we have is through Child Tax Credit/Child Benefit. The P60 (Substitute) shows Total taxable benefit paid for the year up to 5th April 2010 (total paid £8238.03) and shows "Tax Code: NULL Week 1:N" and "Total Tax deducted: £0.00" I get paid fortnightly (approximately £317).

[moozer]

Hi HB, Thanks for responding. The only other income we have is through Child Tax Credit/Child Benefit. The P60 (Substitute) shows Total taxable benefit paid for the year up to 5th April 2010 (total paid £8238.03) and shows "Tax Code: NULL Week 1:N" and "Total Tax deducted: £0.00" I get paid fortnightly (approximately £317).

 

 

In addition the Tax Calculation shows "Basic Rate at 20%" this is on the difference of £1763

[honeybee13]

Hello I would need to check the tax position, but whose name is the child tax credit/benefit in please?

 

HB

[moozer]

Hello I would need to check the tax position, but whose name is the child tax credit/benefit in please?

 

HB

 

The Child benefit is in my wife's name and the Child Tax Credit is both of us

[honeybee13]

I'm confused. According to directgov, both child benefit and child tax credits aren't taxable. Have they sent you anything that tells you how they've calculated your taxable income, I mean how it's broken down?

 

Do you claim any other benefits that could be taxable?

 

My best, HB

[moozer]

I'm confused. According to directgov, both child benefit and child tax credits aren't taxable. Have they sent you anything that tells you how they've calculated your taxable income, I mean how it's broken down?

 

Do you claim any other benefits that could be taxable?

 

My best, HB

 

No other benefits, just the IB. I'll break down the details on the Tax calculation:

Tax year 2009-10

Your income. Incapacity Benefit. Total £8238

Deductions from income. £0.0 Your income after taking away deductions £8238

Tax Allowances. Personal Allowance £6475 Less Total tax Allowances £6475

Income Tax Chargable. Income tax chargable on this amount £1763. Tax on £1763 is Basic Rate at 20% which equals £352.60 (Tax chargeable)

Adjustments. Plus other adjustments £380.80 (this is from tax year 2008-09) Total adjustments plus Tax Payable = £733.40

The result. Tax underpaid = £733.40

[honeybee13]

Well, you won't want to hear this and I hope someone else will chip in, but if your income was all IB and it was over the personal allowance [£6475 this tax year, less in previous years], then it was taxable. You're sure that the whole of the £8238 was IB and they haven't slung in something else that wasn't IB?

 

I forget what the rate of IB is, will check.

 

HB

[honeybee13]

Me again. Looking at the rates payable, it depends on how much they paid you in each tax year. IB is only not taxed for the first 26 weeks of someone's claim.

 

HB

[moozer]

Well, you won't want to hear this and I hope someone else will chip in, but if your income was all IB and it was over the personal allowance [£6475 this tax year, less in previous years], then it was taxable. You're sure that the whole of the £8238 was IB and they haven't slung in something else that wasn't IB?

 

I forget what the rate of IB is, will check.

 

HB

 

Just come off the phone to the tax office and they are investigating this. They have told me that I have a tax code, but I told them that my P60 (substitute) states NULL. I've claimed that there has been a delay in informing me of any information and their failure to notify me of a tax code. I'm currently waiting for them to get back to me. They found it odd that jobcentreplus have issued a NULL tax code - clearly this doesn't concur with their records.

[honeybee13]

Hi there, that was a good idea, please let us know what they say. But I thought HMRC issued tax codes, not the JCP.

 

Hopefully, some of our gurus will be along later, because I know more about tax than I do about benefits.

 

My best, HB

[moozer]

Hi there, that was a good idea, please let us know what they say. But I thought HMRC issued tax codes, not the JCP.

 

Hopefully, some of our gurus will be along later, because I know more about tax than I do about benefits.

 

My best, HB

 

I stated my grievance that I have had no notice about a tax code and the guy I spoke with thought it was a very odd situation with me believing that my tax code was "null". Will let you know how it pans out. Thanks for looking into things HB. xx

[honeybee13]

You're welcome, I hope it works out in your favour. Please keep us posted.

 

And anyone who knows more than I do, please add to the thread.

 

HB x

[moozer]

You're welcome, I hope it works out in your favour. Please keep us posted.

 

And anyone who knows more than I do, please add to the thread.

 

HB x

 

Just come off the phone after a call back from HMRC. They're not moving and are adamant that they have done everything correctly.

 

I'm not having this, but the guy just told me that I cannot do anything other than pay.

 

I need to seek expert advice, because this is ridiculous. They claim that they have issued the correct PAYE tax code, the JCP have no tax code and I'm stuck in the bloody middle and have to pay because of somebody's incompetence and failure to notify me of anything!

 

Any advice from you all? Please help - I have a headache!

[debt4get]

i find this a little strange incapacity benefit at the higher rate is 89.90 per week...this is what i receive and i know it is taxable..however that said it no way adds up to the amount of personal allowance that you are allowed yearly....are you sure you have no other income or benefits that may or may not be taxable? your ib should not come to any more than 4674.80 for the year, which means somewhere according to their figures you have also been given another 3563.20... now i am assuming that you only get the higher rate ib?

[debt4get]

i think i see where the mistake is here on the revenues part...they have taken your entire income including your tax credits...which are not taxable as taxable income...you need to get back to them and explain that your income is only ib which comes to...whatever your rate is higher/lower...whilst the rest of the income is made up of tax credits...not Invalidity Benefit...as it stands they are correct in their figures of the tax you owe...if the amount had been for Invalidity Benefit and any other income that is taxable...however as stated above child benefit and tax credits are not taxable

[loan_ranger]

Hi moozer, there's something amiss in the I.B. figure because there's no way that you could have got £8238 because (even with the maximum additions for age and disability) the most you could get in a year (2010 -2011) would be £6312.80, in year 2009 - 2010 this was £6297.20.

The benefits rates are here, IB is on page 8.

[jabba jones]

Hi moozer, there's something amiss in the I.B. figure because there's no way that you could have got £8238 because (even with the maximum additions for age and disability) the most you could get in a year (2010 -2011) would be £6312.80, in year 2009 - 2010 this was £6297.20.

The benefits rates are here, IB is on page 8.

 

What about an adult dependant increase (if it's in payment)? Although I can't remember if it's taxable or not.

Edited October 15, 2010 by jabba jones

[loan_ranger]

What about an adult dependant increase (if it's in payment)? Although I can't remember if it's taxable or not.

£53.10 per week. (£2761 PA) - that could explain it.

You could always check your bank statements and look for regular weekly/fortnightly credits and work from there.