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cemap unit 1 > Topic 5 State Benefits & HMRC Tax Credits > Flashcards

Topic 5 State Benefits & HMRC Tax Credits Flashcards

1
Q

What are the 2 ways state benefits may affect financial planning?

A
  1. The need for financial protection
    - The amount of cover in place and the amount a person requires
  2. Financial Circumstances
    - If income exceeds a set amount entitlement to some state benefits may be reduced/withdrawn
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2
Q

What is Universal Credit?

A

Is a means tested benefit available to all working age people regardless of their current status

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3
Q

How does Universal Credit work?

A

The amount awarded depends on income and the claimants person & Financial circumstances.

As earnings increase Universal Credit entitlement reduces

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4
Q

Allowance bands for Universal Credit

A

Basic (Single people & couples)
Lower (Young People)
Additional (Disabled, Caring responsibilities, Housing costs & Childcare costs)

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5
Q
  • Carers
  • New Style jobs seekers
  • New style employment & Support
  • Child Benefit
  • Statutory Sick Pay
  • Statutory Maternity Pay
  • Maternity Allowance
  • Attendance Allowance
A

Not covered by Universal Credit

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6
Q

What is Working Tax Credit?

(UC)

A

Tops up the earnings of people on low incomes.

Extra amounts for

  • Working household if a member has a disability
  • Costs of Qualifying Childcare
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7
Q

What is Income Support?

(UC)

A
  • 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
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8
Q

What is Job Seekers Allowance (JSA)?

(UC)

A

A benefit available to unemployed & people working less than 16 hours per week seeking employment

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9
Q

What are the 2 types of JSA

A
  1. New Style
  2. Income based (Been replaced by Universal Credit)
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10
Q

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
A

New Style JSA

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11
Q

What is Support for Mortgage Interest Loan (SMI)?

(UC)

A

Assistance to pay mortgage interest. It is a loan that must be repaid.

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12
Q

Who is SMI available to?

A
  • Those on income support, JSA, Pension Credit and Universal Credit
  • Pays mortgage interest up to those on an upper threshold
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13
Q

How is SMI different for people on Pension credit?

A

Subject to SMI on a lower threshold

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14
Q

What does SMI not do?

A
  • Pay capital on a mortgage
  • Pay insurance premiums
  • Pay mortgage arrears
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15
Q

How does the lender take the SMI payment?

A

It is send to them at the approximate rate of the mortgage interest rate

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16
Q

How is SMI secured?

A
  • By a second charge that is subject to interest.
  • Is repaid if property is sold or ownership is transferred
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17
Q

How is the benefits gap being closed?

A
  • A weekly cap on the maximum income that can be received from benefits was introduced.
  • Equivalent to the average weekly wage
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18
Q
  • 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
A

Subject to benefits cap

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19
Q

What are the two main benefits types for bringing up children?

A
  1. During Pregnancy
  2. Benefits payable as children are growing up
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20
Q

Who is able to apply for Statutory Maternity Pay (SMP)

A

Employed Women

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21
Q

What are the requirements for SMP?

A
  1. Average weekly earnings are above a certain threshold
  2. They have been working for 26 continuous weeks before their “qualifying week”
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22
Q

What is the Qualifying Week for SMP?

A

15th Week before the baby is due

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23
Q

What are the 2 rates of SMP?

A

Initial period

Standard Flat Rate or Set Percentage

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24
Q

How long is SMP & MA payable for?

A
  • For a maximum of 39 weeks

Can be claimed
- 11 weeks before the baby is born and when when the baby is born

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25
Q

Who is Maternity Allowance available to?

A
  • The self employed, people who stopped working and people who have recently changed jobs.
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26
Q

What is Child Benefit?

A

Is a benefit available to anybody responsible for bringing up a child. It is not subject to NICs

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27
Q

What age does Child Benefit stop?

A

Age 16 but 20 if the child is in education

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28
Q

What happens to a couple claiming Child Benefit if they earn over a set threshold?

A
  • Children Benefit is means tested therefore tax is payable if net income is over the threshold
  • Tax due can equal the benefit paid
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29
Q

What is Child Tax Credit?

(UC)

A

A benefit available to anyone bringing up a child on low income

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30
Q

If the child is either:

  • Below 16
  • Below 20 in education

Can Child Tax Credit be claimed?

A

Yes

31
Q

What are “Elements”?

A

The name for Child Tax Credit payments

32
Q

What is Statutory Sick Pay?

A

Sickness benefit paid to employees by an employer who are incapacitated for a minimum of 4 days

33
Q

Why would SSP not be paid to an employee?

A

The may have weekly earnings below the NIC Class 1 level

34
Q

How is SSP paid?

A

Paid for a maximum number of weeks for any spell of sickness

35
Q

What is Employment & Support Allowance? (ESA)

A

An allowance that assess the claimant ability to work based on a capability assessment of their condition

36
Q

Which of these groups are deemed capable of work in some capacity?

Support or Work Related Activity

A

Work Related Capacity

37
Q

ESA new style is subject to what that ESA income based is not?

A

ESA new style is subject to tax

38
Q

What are the 2 Styles of ESA?

A

New style and Income Based

39
Q

What is Attendance Allowance?

A

Benefit for people who have reached state pension age who need help with personal care due to sickness

40
Q

What are the 2 types of Attendance Allowance?

A
  1. Lower Rate
    Need help by day or night
  2. Higher Rate
    Need help by day and night
41
Q

What are Disabled Living Allowance (DLA) & Personal Independent Payment (PIP)?

A

A benefit for people who need help with personal care or getting around

42
Q

What is PIP going to do to DLA

A

PIP is replacing DLA

43
Q

Who can claim for PIP

A

Anyone between 16 & State pension age

44
Q

What benefit applies to people born before 8th April 1948?

A

Disabled Living Allowance (DLA)

45
Q

What are the 2 components of DLA & PIP?

A
  1. Care Component
  2. Mobility Component
46
Q

What is Carer’s Allowance?

A
  • An allowance for people who care for a sick or disabled person
  • It does not depend on NIC contributions
47
Q

Do people who claim CA need to declare this income?

A

Yes they must declare this income on their tax returns

48
Q

Claiming Carer’s Allowance can do what to the claimer and the person in their care?

A

Can affect the other benefits they may be receiving

49
Q

Is Attendance Allowance means tested?

A

No it is not dependent on NICs payments

50
Q

What happens if someone claiming benefit goes into hospital?

A

The benefit will continue to be paid

51
Q

How much of a person’s life (20 +) should a person spend in retirement according to regular reviews?

A

1/3

52
Q

When did the New State Pension (SPA) begin?

A

6th April 2016

53
Q

On the old basic state pension how many years did a person need to contribute NICs for to qualify?

A

30 years

54
Q

How did people qualify for a “Category B Pension” ?

A

Based on their spouses contributions

55
Q

Who is eligible for Additional State Pension?

A

Employees who reached retirement after 6th April 2016 and who paid NICs Class 1

56
Q

What are the 2 elements of Pension Credit Called?

A
  1. Guaranteed Credit
  2. Savings Credit
57
Q

What type of Pension Credit is classed as?

Tops up an individuals weekly income to a specified amount and over state pension age?

A

Guaranteed Credit

58
Q

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

A

Savings Credit

59
Q

Is Pension Credit taxable?

A

No

60
Q

How is the New State Pension simpler?

A

Based solely on NIC’s contributions

61
Q

How many years does a person need to contribute to gain the full New State Pension?

A

35 years

62
Q

What happens if someone has less than 10 years of NICs contributions?

A

They are not eligible for a New State Pension

63
Q

The Triple Lock Guarantee promises to do what?

A

Increase earnings by the higher of:

  • Earnings (increase)
  • Inflation
  • 2.5%
64
Q

What does “ Means tested” mean?

A

Income is assed to see your income levels and capital

65
Q

True or False

Child Tax Credit is being replaced by Universal Credit?

A

True

66
Q

What do people who claim Carer’s Allowance receive?

A

They are credited with NICs contributions

67
Q

Is Statutory Maternity Pay (SMP) subject to tax and NICs?

True or False

A

True

68
Q

Is Child Benefit subject to Tax & NICs?

A

No

69
Q

Is Child Benefit tax free?

A

Yes it is a tax free benefit

70
Q

Is Statutory Sick Pay subject to tax and NIC’s

A

Yes they are just as normal wages are

71
Q

Are Disabled Living Allowance (DLA) & Personal Independent Payment (PIP) subject to tax?

A

No they are both tax free

72
Q

Do people on Income Support need to pay tax?

A

No it is tax free

73
Q

How is the tax charged for earners over the threshold limit for Child Benefit

A

For every £100 over the threshold limit 1% is charged

cemap unit 1 (12 decks)

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