Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

CeMAP 1 - UKFR > Topic 5 > Flashcards

Topic 5 Flashcards

State benefits and HMRC tax credits

1
Q

What is the main purpose of state benefits in the UK?

A

The main purpose of state benefits is to act as a safety net in times of need, rather than to support a comfortable standard of living.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

How can state benefits affect the need for financial protection?

A

State benefits can affect the need for financial protection by determining the difference between the income or capital required and the existing cover (including private, employer provision, and state benefits).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

How do financial circumstances affect entitlement to benefits?

A

Financial circumstances can affect entitlement to benefits, as certain benefits are means-tested. If income or savings exceed specified levels, the amount of benefit may be reduced, potentially making some financial plans less attractive.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What impact can an increase in income or assets have on entitlement to state benefits?

A

An increase in income or assets could reduce entitlement to means-tested benefits, such as Universal Credit, making the financial plan less attractive than initially thought.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Are all state benefits large in amount?

A

No, many state benefits are small in amount and mainly help to prevent extreme poverty, rather than providing a comfortable standard of living.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is Universal Credit?

A

Universal Credit is a means-tested benefit for people of working age, designed to replace multiple benefits with a simpler system. It is not specifically for people who are in or out of work.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Which benefits has Universal Credit replaced for new claimants?

A

Universal Credit has replaced the following benefits for new claimants:

Income Support
Income-based Jobseeker’s Allowance
Income-related Employment and Support Allowance
Working Tax Credit and Child Tax Credit
Housing Benefit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How is the amount of Universal Credit determined?

A

The amount of Universal Credit is based on the claimant’s income, personal and financial circumstances, with a basic allowance for singles or couples, and additional amounts for disabilities, caring responsibilities, housing costs, and children/childcare costs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is an “earnings disregard” in Universal Credit?

A

An earnings disregard is an amount of income that is not taken into account when calculating Universal Credit. The disregard varies based on the claimant’s needs, such as whether they have children.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How does earnings affect Universal Credit entitlement?

A

As earnings increase, entitlement to Universal Credit decreases. There is also a maximum cap on the total amount of state benefits that a household can receive, which includes Child Benefit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Which benefits are not included in Universal Credit?

A

Benefits that remain outside of Universal Credit include:

Carer’s Allowance
New style Jobseeker’s Allowance
New style Employment and Support Allowance
Disability Living Allowance/Personal Independence Payment
Child Benefit
Statutory Sick Pay
Statutory Maternity Pay
Maternity Allowance
Attendance Allowance (for claimants over state pension age)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Will Universal Credit replace all benefits immediately?

A

No, full implementation of Universal Credit is still ongoing and may not be complete for a few years. However, it is designed to replace several benefits over time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the purpose of Working Tax Credit?

A

Working Tax Credit is designed to top up the earnings of employed or self-employed people on low incomes, including those without children.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the additional amounts available under Working Tax Credit?

A

Additional amounts are available for:

Working households where someone has a disability
The costs of qualifying childcare

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Has Working Tax Credit been replaced?

A

Yes, Working Tax Credit has been replaced by Universal Credit. New claims can only be made by those who are already receiving Child Tax Credit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What was the purpose of Income Support?

A

Income Support was designed to help people aged between 16 and state pension age whose income was below a certain level and who worked less than 16 hours per week (if they had a partner, their partner must work less than 24 hours per week).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Could Income Support be used for anything other than topping up income?

A

Yes, Income Support could be used to top up other benefits or part-time earnings.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Can new claims for Income Support be made?

A

No, new claims for Income Support can no longer be made. Those on low incomes can apply for Universal Credit instead.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is Jobseeker’s Allowance (JSA)?

A

JSA is a benefit for people who are unemployed or working less than 16 hours and are actively seeking work.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

How many types of Jobseeker’s Allowance exist?

A

There are two forms of JSA: new style and income-based. Income-based JSA is being replaced by Universal Credit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Who is eligible for new style Jobseeker’s Allowance (JSA)?

A

People are eligible for new style JSA only if they have paid sufficient Class 1 National Insurance contributions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

How long is new style JSA paid for?

A

New style JSA is paid for a maximum of six months at a fixed rate, irrespective of savings or partner’s earnings.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Are JSA payments taxable?

A

Yes, JSA payments are made gross but are taxable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What National Insurance benefit do JSA claimants receive?

A

Claimants are usually credited with National Insurance contributions (NICs) for every week that they receive JSA.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Who can apply for Support for Mortgage Interest (SMI)?
Those receiving Income Support, income‑related Jobseeker’s Allowance, income‑related Employment and Support Allowance, Universal Credit, or Pension Credit can apply for SMI.
26
What does Support for Mortgage Interest (SMI) pay for?
SMI pays interest on a mortgage up to an upper threshold, but does not cover associated mortgage costs like capital repayment, insurance premiums, or mortgage arrears.
27
How is the SMI loan repaid?
The SMI loan is repaid when the property is sold or ownership of the property is transferred. The loan is secured on the property by a second charge and is subject to interest.
28
What is the benefits cap?
The benefits cap limits the maximum weekly income a household can receive from benefits, capping it to the level of the average UK wage.
29
Which benefits are subject to the benefits cap?
Employment and Support Allowance Income Support Jobseeker’s Allowance Housing Benefit Maternity Allowance Child Benefit Child Tax Credit Bereavement Allowance Incapacity Benefit Severe Disablement Allowance Universal Credit (unless deemed unfit for work) Widowed Parent’s Allowance
30
What are the two categories of benefits related to bringing up children?
Benefits related to bringing up children fall into two categories: Benefits payable during pregnancy Benefits payable as the children are growing up
31
What are the eligibility requirements for Statutory Maternity Pay (SMP)?
The employee must have average weekly earnings above a certain threshold. They must have worked for the same employer for 26 weeks before the 15th week before their due date.
32
What is the duration and payment structure for Statutory Maternity Pay (SMP)?
SMP is paid for up to 39 weeks. The initial period is paid at a percentage of average weekly earnings, followed by a flat rate or a lower percentage thereafter. SMP is taxable.
33
Who is not eligible for Statutory Maternity Pay (SMP) and what alternative benefit might they be able to claim?
Women who are self-employed, have recently changed jobs, or stopped working are not eligible for SMP. They may be able to claim Maternity Allowance, which is paid by the Department for Work and Pensions (DWP).
34
What is the eligibility for Maternity Allowance, and how is it paid?
Maternity Allowance is paid to eligible women based on their employment status (e.g., employed, self-employed, or recently stopped working). It is paid by DWP, not employers, for a maximum of 39 weeks and is not subject to tax or NICs. It can start 11 weeks before the baby is due and end when the baby is born.
35
What are the eligibility criteria for receiving Child Benefit and what factors affect the payment amount?
Child Benefit is available to parents or others responsible for a child under 16 (or up to 19 if in full-time education or approved training). A higher rate is paid for the eldest child, and a lower rate for subsequent children. It is not affected by other benefits or NICs.
36
How is Child Benefit means-tested and what can reduce the tax charge?
Child Benefit is means-tested through a high income tax charge if either partner's adjusted net income exceeds the threshold. The charge is 1% of Child Benefit for each £100 over the threshold. It can be reduced by making additional personal pension contributions or charitable donations.
37
Who is eligible for Child Tax Credit and what factors affect the amount received?
Child Tax Credit is for individuals responsible for children under 16 or under 20 in eligible education or training. The amount received depends on income, number of children, and whether any children are disabled.
38
What has replaced Child Tax Credit, and who can still claim it?
Child Tax Credit has been replaced by Universal Credit. New claims can only be made by those already claiming Working Tax Credit.
39
What is Statutory Sick Pay (SSP)?
SSP is paid by employers to employees who are off work due to sickness or disability for four days or longer, provided their average weekly earnings are above the level at which Class 1 NICs are payable.
40
How long can Statutory Sick Pay (SSP) be paid for?
SSP is paid for a maximum number of weeks in any spell of sickness. Spells of sickness with less than a minimum number of weeks between them count as one spell.
41
Are amounts paid as Statutory Sick Pay (SSP) subject to tax and NICs?
Yes, amounts paid as SSP are liable to income tax and to Class 1 NICs, just as normal earnings would be.
42
What is Employment and Support Allowance (ESA)?
ESA is a benefit for people who are ill or disabled. There are two forms of ESA: new style ESA, which depends on a person’s NIC record, and income-based ESA, which is means-tested.
43
How is eligibility for new style ESA determined?
Eligibility for new style ESA depends on a person’s NIC record. It is not means-tested, and the payments are taxable.
44
How does income-based ESA differ from new style ESA?
Income-based ESA does not depend on NICs, is means-tested, and is not taxable, whereas new style ESA is not means-tested and depends on the NIC record.
45
What is the work capability assessment for ESA claimants?
The work capability assessment evaluates the impact of a claimant’s health condition on their ability to work. It determines whether they are placed in a work-related activity group or a support group.
46
What is the difference between the work-related activity group and the support group in ESA?
Those in the work-related activity group are deemed capable of working in some capacity and required to take steps to help them move into employment. Those in the support group have health conditions that severely limit their capacity to work.
47
What has happened to income-related ESA?
Income-related ESA has been replaced by Universal Credit, and no new claims can be made. Existing claimants can continue to receive payments until they are no longer eligible.
48
What is Attendance Allowance?
Attendance Allowance is a benefit for people who have reached state pension age and need help with personal care due to sickness or disability.
49
Is Attendance Allowance means-tested?
No, Attendance Allowance is not means-tested and does not depend on NICs.
50
What are the two levels of Attendance Allowance?
The two levels are a lower rate for those needing help with personal care by day or night, and a higher rate for those needing help both by day and night.
51
How does Attendance Allowance affect other state benefits?
Some other state benefits, such as Pension Credit, Housing Benefit, and Council Tax Reduction, are paid at a higher rate if the claimant is also receiving Attendance Allowance.
52
What is Disability Living Allowance (DLA)?
Disability Living Allowance (DLA) is a tax-free benefit for people who need help with personal care and/or need help getting around.
53
What is replacing Disability Living Allowance (DLA)?
Disability Living Allowance (DLA) is being replaced by Personal Independence Payment (PIP) for people aged between 16 and state pension age.
54
Who can continue to claim Disability Living Allowance (DLA)?
People born on or before 8 April 1948 can continue to claim DLA.
55
What are the two components of DLA and PIP?
The two components are the Care component, for those who need help with daily activities, and the Mobility component, for those with difficulty walking or unable to walk.
56
How does the Care component of DLA or PIP assist claimants?
The Care component helps people who need help with daily living activities like washing, dressing, using the toilet, or cooking a meal.
57
What does the Mobility component of DLA or PIP provide for claimants?
The Mobility component applies to people who have difficulty walking or cannot walk at all.
58
What is Carer’s Allowance (CA)?
Carer’s Allowance (CA) is a benefit for people who are caring for a sick or disabled person, and they do not have to be a relative of the person they are caring for.
59
Does Carer’s Allowance (CA) depend on having paid NICs?
No, the right to receive Carer’s Allowance (CA) does not depend on having paid National Insurance Contributions (NICs).
60
Is Carer’s Allowance (CA) taxable?
Yes, Carer’s Allowance (CA) is taxable and must be declared on tax returns.
61
How can claiming Carer’s Allowance (CA) affect the claimant?
Claiming Carer’s Allowance (CA) can affect the other benefits the claimant receives, as well as the benefits the person they are caring for receives.
62
What happens to state benefits when someone goes into hospital?
In general terms, state benefits that were being claimed will continue to be paid when someone goes into hospital.
63
Who meets the needs of people in hospital that are usually met by state benefits or pensions?
The NHS meets the needs of people in hospital that are usually met by state benefits or pensions.
64
When are state pensions payable?
State pensions are payable from state pension age (SPA).
65
What principle guides the regular reviews of state pension age (SPA)?
The principle is that people should spend one-third of their adult life (starting at age 20) in retirement.
66
What change to state pension age was recommended in the March 2017 review?
The review recommended that state pension age be increased from age 67 to age 68 between 2037 and 2039.
67
What significant change occurred to the state pension system in April 2016?
The new state pension was introduced, replacing the basic state pension with an additional earnings-related element for employed individuals.
68
How are state pension benefits paid to those reaching SPA before and after 6 April 2016?
Those reaching SPA before 6 April 2016 receive benefits under the basic and additional state pensions system. Those reaching SPA on or after 6 April 2016 receive the new state pension, with an adjustment if they would have been better off under the previous system.
69
What is the purpose of the state pension system?
The purpose of the state pension system is to provide a basic standard of living in retirement.
70
How does the state pension system operate?
The state pension system operates on a pay-as-you-go basis, with National Insurance contributions from the working population being used to pay pensions to those entitled to receive them.
71
What challenge does the state pension system face?
The challenge is that with the number of pensioners increasing and the number of employed individuals decreasing, there is limited scope for making generous increases to state pensions.
72
Who was initially eligible for the basic state pension?
The basic state pension was initially paid only to employed people on their retirement and was not related to their earnings.
73
How was the basic state pension extended over time?
It was later extended to include self-employed people and others who had made sufficient National Insurance (NI) contributions (at least 30 years).
74
How were benefits adjusted for lower contribution rates?
Benefits were scaled down for lower contribution rates.
75
What is a ‘Category B’ pension?
A ‘Category B’ pension is a pension based on a spouse or civil partner’s pension entitlement for those who had not made enough NI contributions of their own to qualify for a full basic state pension.
76
What is the additional state pension?
The additional state pension is an entitlement on top of the basic state pension for some employees who reached state pension age before 6 April 2016.
77
What were the three earnings-related state pension schemes that existed before the current system?
The three schemes were: The graduated pension scheme (1961-1975) The state earnings-related pension scheme (SERPS) (1978-2002) The state second pension (S2P) (2002 onwards)
78
Who was eligible for the additional state pension?
The additional state pension was available only to employed people who paid Class 1 National Insurance contributions. Self-employed people could not build entitlement to additional state pension benefits.
79
What options did employed people have with respect to SERPS/S2P?
Employed people had the option to ‘contract-out’ of SERPS/S2P, reducing or redirecting the NICs that would have gone to SERPS/S2P to an alternative pension.
80
What are the two elements of Pension Credit?
Guarantee Credit, which tops up income to a specified minimum amount Savings Credit, an additional payment for those who reached state pension age before 6 April 2016 and saved towards retirement
81
Is Pension Credit taxable?
No, Pension Credit is not taxable.
82
What is the new state pension introduced for those reaching retirement age on or after 6 April 2016?
The new state pension is a simplified state pension with a single level of benefit, no additional earnings-related element, and is determined by an individual’s National Insurance (NIC) record.
83
What is the eligibility requirement for the maximum new state pension?
To be eligible for the maximum new state pension, an individual needs to have made or been credited with 35 years’ NICs. Those with under 10 years of NICs are not usually eligible for any state pension.
84
Do carers receive National Insurance credits?
Yes, carers are credited with National Insurance (NICs).
85
What is the ‘triple lock guarantee’ for the state pension?
The ‘triple lock guarantee’ ensures that both the basic state pension and the new state pension increase each year by the higher of: Earnings (measured by the Average Weekly Earnings Index) Inflation (measured by the Consumer Prices Index) 2.5%
86
What criticisms have been made of the state pension triple lock?
The state pension triple lock is seen as costly for taxpayers, with arguments focusing on the policy's cost and intergenerational fairness. Proposed modifications include replacing it with a double lock based only on increases in earnings or CPI.

CeMAP 1 - UKFR (25 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions