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Income tax:
The law relating to Income Tax applies equally, of course, to disabled people as to non-disabled people. There are, however, some points to note.
State benefits: Many state benefits are not treated as income for tax purposes, but additions for adult dependents are taxable.
Incapacity Benefit paid either:
- in the first 28 weeks of incapacity at the lower
short-term rate, or-
- on a transitional basis for a period of incapacity
which began before 13 April 1995,
and for which Invalidity Benefit used to be
payable, unless there is a break of more
than eight weeks in your claim.
Severe Disablement Allowance.
Industrial Injuries Benefit.
Attendance Allowance.
Disability Living Allowance.
Housing Benefit.
Maternity Allowance ( but not Statutory Maternity Pay)
Child Benefit and One-parent Benefit.
Income Support paid to those who are not required to sign on as unemployed.
Family Credit.
Christmas payment to pensioners.
Guardians Allowance.
Child’s Special Allowance.
War Widow’s Pension.
War Disablement Pension.
Social Fund Payments.
Council Tax Benefit.
The following, however, are treated as income for Income Tax purposes:
Incapacity Benefit paid on new or revised claims (from April 1995) at the higher short-term rate and long-term rate.
Invalid Care Allowance.
Statutory Sick Pay and statutory Maternity Pay.
Employer’s contribution to sick pay paid out of an employer’s sick pay scheme.
Retirement Pension, including any invalidity addition.
Widow’s Pension, Widow’s allowance and Widowed Mother’s Allowance.
Unemployment Benefit.
Income Support paid to those who are unemployed, on strike, or involved in a trade dispute.
Jobseeker’s Allowance.
Industrial Death Benefit ( if paid as a pension)
Where benefit is taxable, additions for adult dependants (but not those for children) are also taxable.
Tax on Incapacity Benefit:
Inland Revenue leaflet IR144, Income tax and incapacity benefit, gives further information.
Tax on Jobseeker’s Allowance:
Inland Revenue leaflet IR41, Income tax and jobseeker’s allowance, gives further information.
Tax on savings: people on low incomes:
Interest on bank and building society accounts is now normally automatically taxed at source. If, however, you have a low income it may be that you are not liable to pay as much as the bank/building society has deducted. In the simple case, if it is clear that your gross income in the current tax year (including the gross interest) will not exceed your tax allowance (so that you are not liable to pay Income Tax) you can ask your bank or building society to pay the interest gross, i.e without deducting tax. If necessary, this can be done by someone approved by the Department of social Security to act as an appointee in respect of social security benefits.
Alternatively, your gross income (including gross interest) may be such that although you are liable to pay tax, at least part of the interest is liable only at the first 20 per cent rate.
If tax has been deducted by your bank or building society which is greater than the correct liability you can ask for a refund. This will normally be made at the end of the tax year, but interim payments can be made earlier if the amount of tax repayable is £50 or more. Further information is given in Inland Revenue booklets IR127, Are you paying to much tax on your savings? And IR 110, A guide for people with savings, which contains a form R 85 to stop tax being deducted from your interest and R40 to claim a repayment.
Age allowances: Personal allowances are higher for people aged 65 to 74 (1998/9:£5,400) and even higher for those aged 75 or more (1998/9: £5,600). However, these higher allowances are reduced if your total gross income exceeds a specified amount (1998/9: £16,200). For every £2 over the limit you will lose £1 of the allowance, down to the level of the basic personal allowance (1998/9: £4,195. If you were born before 6th April 1934 (in relation to tax year 1998/9), be sure to check your notice of coding that the Inland Revenue has got this right. Further information is given in Inland Revenue leaflet IR121, Income Tax and Pensioners.
The transfer of assets from one partner to another, as an outright gift, may reduce the loss of age-related allowances by cutting back the income of the donor partner.
A guide to all Income Tax personal allowances (Leaflet IR90, Tax allowances and reliefs ) can be obtained free from any tax office or tax enquiry centre, where information and help on specific problems can be obtained (see phone book for details).
Married couples: A married couple who live together can claim, in addition to their personal allowances, the married couple’s allowance (1998/9: £1,900, restricted to 15 per cent). This can, if both partners agree, be allocated to the wife rather than the husband, or split equally. A husband and wife who are not living under the same roof can nevertheless claim the allowance if neither of them wants to make the separation permanent.
The allowance is higher if either partner is aged 65 to 74 (1998/9: £3,305, restricted to 15 per cent), even higher if either partner is aged 75 or more (1998/9: £3,345, restricted to 15 per cent). However, if the man’s total gross income exceeds a specified amount (1998/9: £16,200), and there is still an excess after any reduction on his personal age allowance as explained above, the higher married couple’s allowance will then be reduced again by £1 for every £2 of excess income, down to the level of the married couple’s allowance appropriate to the under 65 rate (1998/9: £1,900, restricted to 15 per cent).
Extra married couple’s allowance given on account of age can be transferred from husband to wife only if he does not have sufficient income to use it
Transferring assets between husband and wife, as an outright gift, may reduce the loss of age-related allowances by cutting back the income of the donor partner. This can also reduce the impact of tax on the interest from savings. A useful Inland Revenue leaflet IR80, Income Tax and the Married Couple, gives further details.
Blind person’s allowance: A taxpayer who is a registered blind person is entitled to an allowance of £1,330 (1998/9). In Scotland and Northern Ireland, where there is no register, this means a person who is so blind as to be unable to do any work for which eyesight is essential. Where both husband and wife are registered blind, they can each claim the allowance in their own right. A registered blind person may claim the full allowance even where they have been registered for only part of the tax year. Any allowance which one partner is unable to use may be transferred to their spouse.
In England and Wales, when a person is registered blind, entitlement to the blind person’s tax allowance begins with the year previous to the year of registration if, at the end of that earlier year, the blind person concerned had obtained the proof of blindness subsequently to qualify for registration.
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