Topic 5 State Benefits & HMRC Tax Credits Flashcards
What are the 2 ways state benefits may affect financial planning?
- The need for financial protection
- The amount of cover in place and the amount a person requires - Financial Circumstances
- If income exceeds a set amount entitlement to some state benefits may be reduced/withdrawn
What is Universal Credit?
Is a means tested benefit available to all working age people regardless of their current status
How does Universal Credit work?
The amount awarded depends on income and the claimants person & Financial circumstances.
As earnings increase Universal Credit entitlement reduces
Allowance bands for Universal Credit
Basic (Single people & couples)
Lower (Young People)
Additional (Disabled, Caring responsibilities, Housing costs & Childcare costs)
- Carers
- New Style jobs seekers
- New style employment & Support
- Child Benefit
- Statutory Sick Pay
- Statutory Maternity Pay
- Maternity Allowance
- Attendance Allowance
Not covered by Universal Credit
What is Working Tax Credit?
(UC)
Tops up the earnings of people on low incomes.
Extra amounts for
- Working household if a member has a disability
- Costs of Qualifying Childcare
What is Income Support?
(UC)
- Tax free benefit for people aged 16 - retirement age
- Low income working less than 16 hours per week
- Top up income
- Available to people with no income
What is Job Seekers Allowance (JSA)?
(UC)
A benefit available to unemployed & people working less than 16 hours per week seeking employment
What are the 2 types of JSA
- New Style
- Income based (Been replaced by Universal Credit)
What is this type of JSA
- Paid sufficient Class 1 NIC
- Paid at fixed rate for 6 months
- Paid gross
- Credited with NIC for every week
New Style JSA
What is Support for Mortgage Interest Loan (SMI)?
(UC)
Assistance to pay mortgage interest. It is a loan that must be repaid.
Who is SMI available to?
- Those on income support, JSA, Pension Credit and Universal Credit
- Pays mortgage interest up to those on an upper threshold
How is SMI different for people on Pension credit?
Subject to SMI on a lower threshold
What does SMI not do?
- Pay capital on a mortgage
- Pay insurance premiums
- Pay mortgage arrears
How does the lender take the SMI payment?
It is send to them at the approximate rate of the mortgage interest rate
How is SMI secured?
- By a second charge that is subject to interest.
- Is repaid if property is sold or ownership is transferred
How is the benefits gap being closed?
- A weekly cap on the maximum income that can be received from benefits was introduced.
- Equivalent to the average weekly wage
- Employment & Support Allowance
- Income Support
- JSA
- Housing Benefit
- Maternity Allowance
- Child Benefit
- Child Tax Credit
- Bevreament Allowance
- Incapacity Benefits
- Severe Disability Allowance
- Universal Credit (unfit for work)
- Widowed Parent’s Allowance
Subject to benefits cap
What are the two main benefits types for bringing up children?
- During Pregnancy
- Benefits payable as children are growing up
Who is able to apply for Statutory Maternity Pay (SMP)
Employed Women
What are the requirements for SMP?
- Average weekly earnings are above a certain threshold
- They have been working for 26 continuous weeks before their “qualifying week”
What is the Qualifying Week for SMP?
15th Week before the baby is due
What are the 2 rates of SMP?
Initial period
Standard Flat Rate or Set Percentage
How long is SMP & MA payable for?
- For a maximum of 39 weeks
Can be claimed
- 11 weeks before the baby is born and when when the baby is born
Who is Maternity Allowance available to?
- The self employed, people who stopped working and people who have recently changed jobs.
What is Child Benefit?
Is a benefit available to anybody responsible for bringing up a child. It is not subject to NICs
What age does Child Benefit stop?
Age 16 but 20 if the child is in education
What happens to a couple claiming Child Benefit if they earn over a set threshold?
- Children Benefit is means tested therefore tax is payable if net income is over the threshold
- Tax due can equal the benefit paid
What is Child Tax Credit?
(UC)
A benefit available to anyone bringing up a child on low income
If the child is either:
- Below 16
- Below 20 in education
Can Child Tax Credit be claimed?
Yes
What are “Elements”?
The name for Child Tax Credit payments
What is Statutory Sick Pay?
Sickness benefit paid to employees by an employer who are incapacitated for a minimum of 4 days
Why would SSP not be paid to an employee?
The may have weekly earnings below the NIC Class 1 level
How is SSP paid?
Paid for a maximum number of weeks for any spell of sickness
What is Employment & Support Allowance? (ESA)
An allowance that assess the claimant ability to work based on a capability assessment of their condition
Which of these groups are deemed capable of work in some capacity?
Support or Work Related Activity
Work Related Capacity
ESA new style is subject to what that ESA income based is not?
ESA new style is subject to tax
What are the 2 Styles of ESA?
New style and Income Based
What is Attendance Allowance?
Benefit for people who have reached state pension age who need help with personal care due to sickness
What are the 2 types of Attendance Allowance?
-
Lower Rate
Need help by day or night -
Higher Rate
Need help by day and night
What are Disabled Living Allowance (DLA) & Personal Independent Payment (PIP)?
A benefit for people who need help with personal care or getting around
What is PIP going to do to DLA
PIP is replacing DLA
Who can claim for PIP
Anyone between 16 & State pension age
What benefit applies to people born before 8th April 1948?
Disabled Living Allowance (DLA)
What are the 2 components of DLA & PIP?
- Care Component
- Mobility Component
What is Carer’s Allowance?
- An allowance for people who care for a sick or disabled person
- It does not depend on NIC contributions
Do people who claim CA need to declare this income?
Yes they must declare this income on their tax returns
Claiming Carer’s Allowance can do what to the claimer and the person in their care?
Can affect the other benefits they may be receiving
Is Attendance Allowance means tested?
No it is not dependent on NICs payments
What happens if someone claiming benefit goes into hospital?
The benefit will continue to be paid
How much of a person’s life (20 +) should a person spend in retirement according to regular reviews?
1/3
When did the New State Pension (SPA) begin?
6th April 2016
On the old basic state pension how many years did a person need to contribute NICs for to qualify?
30 years
How did people qualify for a “Category B Pension” ?
Based on their spouses contributions
Who is eligible for Additional State Pension?
Employees who reached retirement after 6th April 2016 and who paid NICs Class 1
What are the 2 elements of Pension Credit Called?
- Guaranteed Credit
- Savings Credit
What type of Pension Credit is classed as?
Tops up an individuals weekly income to a specified amount and over state pension age?
Guaranteed Credit
What type of Pension Credit is classed as?
Additional payment for people who reached state pension before age before 06/04/2016 who saved for retirement
Savings Credit
Is Pension Credit taxable?
No
How is the New State Pension simpler?
Based solely on NIC’s contributions
How many years does a person need to contribute to gain the full New State Pension?
35 years
What happens if someone has less than 10 years of NICs contributions?
They are not eligible for a New State Pension
The Triple Lock Guarantee promises to do what?
Increase earnings by the higher of:
- Earnings (increase)
- Inflation
- 2.5%
What does “ Means tested” mean?
Income is assed to see your income levels and capital
True or False
Child Tax Credit is being replaced by Universal Credit?
True
What do people who claim Carer’s Allowance receive?
They are credited with NICs contributions
Is Statutory Maternity Pay (SMP) subject to tax and NICs?
True or False
True
Is Child Benefit subject to Tax & NICs?
No
Is Child Benefit tax free?
Yes it is a tax free benefit
Is Statutory Sick Pay subject to tax and NIC’s
Yes they are just as normal wages are
Are Disabled Living Allowance (DLA) & Personal Independent Payment (PIP) subject to tax?
No they are both tax free
Do people on Income Support need to pay tax?
No it is tax free
How is the tax charged for earners over the threshold limit for Child Benefit
For every £100 over the threshold limit 1% is charged
