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CeMAP 1 (Unit one) > Topic 5 (State Benefits & HMRC tax credits) > Flashcards

Topic 5 (State Benefits & HMRC tax credits) Flashcards

1
Q

What are the 2 ways in which financial planning can be affected by state benefits?

A
  1. Can affect the need for protection (cover required relates to the income or benefits someone needs)
  2. Financial circumstances can affect entitlement to state benefits
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2
Q

What is meant by ‘means tested’?

A

It means the amount an individual can claim maybe affected by their income/savings

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3
Q

Why is it important for a financial advisor to know about state benefits?

A

They need to know what someone is entitled to one already claiming when giving advice

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4
Q

What support is available for people on low income?

A

Universal credit

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5
Q

What is Universal credit?

A

A means tested benefit for people of working age

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6
Q

What is working tax credit?

A

A payment to top up the earnings of working people who are on low incomes, extra is available for the disabled or people who need childcare

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7
Q

What is income support and how can it be claimed?

A

It’s a tax free benefit for people aged 16-state pension age

Can be claimed by those who have no income or used to top up other benefits

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8
Q

Describe a key feature of income support

A

It is means tested on savings and income

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9
Q

Who can claim income support?

A
  • anyone above 16 - until qualified for pension credit
  • pregnant of single parent with child under 5
  • the sick or disabled
  • looking after disabled or elderly
  • un-employed
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10
Q

What is Jobseekers Allowance (JSA) and the 2 forms?

A

It is a benefit for the unemployed or someone actively seeking work
It is split into contribution based and income based(replaced by universal credit)

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11
Q

Describe the features of Contribution based JSA

A
  • dependant on paid class 1 NIC’s
  • paid for a max of 6 months
  • paid in full but is taxable
  • no additional benefits are paid
  • Claimant must be out of work
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12
Q

Describe the support of mortgage interest loans

A

SMI will pay interest on a mortgage up to £200,000

The SMI loan is secured on the property by way of a second charge and is subject to interest

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13
Q

What is the benefits cap?

A

Was introduced to limit the maximum paid to the level of the average UK wage

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14
Q

What are the 2 categories that children related benefits fall into?

A
  1. Benefits payable during pregnancy

2. Benefits paid as children are growing up

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15
Q

What is statutory maternity pay?

A

For women who fall pregnant whilst in employment can claim SNP from their employer

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16
Q

What is the basic criteria for SMP?

A
  • must of worked for the same employer for 26 weeks

- average weekly earnings in the eight weeks up to the qualifying week must not be less than the lower earnings limit

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17
Q

How is SMP paid?

A
  • paid by employer
  • payable for 39 weeks
  • earliest start date is 11 weeks before the baby is due
  • latest payment date is when baby is born
  • payments are taxable
  • National insurance is due on the amounts paid
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18
Q

Who can claim Maternity Allowance?

A

Women who do not qualify for SMP such as self-employed or someone in a new job

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19
Q

What is the basic criteria for maternity allowance?

A
  • not eligible to claim SMP
  • Paid by the Department for works and pensions
  • payable for 39 weeks
  • Must be expecting the baby in next 11 weeks or given birth to make a claim
20
Q

Describe the payments of Maternity allowance

A
  • Flat rate paid by Department for works and pensions not employer
  • Has a lower rate then SMP and isn’t taxable
  • Not subject to national insurance contributions
21
Q

What is child benefit?

A

The benefit available for someone who is bringing up a child

22
Q

Describe the basic criteria for child benefit

A
  • means tested in the form of an income tax charge
  • available for each child under 16
  • Can continue if in full education
23
Q

Describe the payments for child benefit

A
  • not dependent on having paid sufficient NICs
  • if highest earning parent has a net income over 50,000 the tax charge reduces the full benefit by 1% for every £100 over threshold
  • net income over £60,000 the tax charge will cancel out the benefit
24
Q

What is child tax credit designed for?

A

It’s designed to help people bringing up children on low incomes

25
Q

When can you make a claim for child tax credit

A
  • if you have a child under 16

- a child under 20 but in full education/training

26
Q

What is the basic criteria for Statutory sick pay?(SSP)

A
  • employees whose earnings are above lower earning limit for NICs
  • spells of sickness with less than 8 weeks between each one
27
Q

Describe the payment for SSP?

A
  • by the employer
  • taxable
  • subject to NI deductions
  • paid for a max of 28 weeks in one spell of sickness
28
Q

What are the 2 forms of ESA (employment and support allowance)?

A
  1. Contribution based

2. Income based

29
Q

What is a contribution based ESA?

A

Where the individual is eligible for universal credit and depends on someone’s NICs (not means tested but is taxable)

30
Q

What is income based ESA?

A

Doesn’t depend on NICs and is means tested but not taxable

31
Q

Explain the function on ‘work capability assessment’

A

Split into 2 groups the work related activity group and the support group. It looks at the impact of how someone’s health can affect their work ability. Different rates are payable on both groups

32
Q

What is the basic criteria for Attendance Allowance?

A

For those 65+ with daily care supervision needs

It is a tax free weekly cash benefit

33
Q

Explain the payment process of Attendance Allowance

A
  • not means tested
  • not NI dependant
  • can result in other state benefits being paid at a higher rate
34
Q

What is DLA?

A

Disability living Allowance

- is tax free and there for those who need help getting around

35
Q

What is PIP?

A

Personal independence payments

- replacing DLA for those ages 16-64

36
Q

What is a care component?

A

Available for those who need help carrying out daily tasks

37
Q

What is a mobility component?

A

For those who have difficulty working

38
Q

Describe the payment for carer’s Allowance (CA)

A
  • not NI dependant or taxable

- can affect other benefits

39
Q

What support is available for those in retirement?

A

The national insurance act provided state pensions which are on a pay as you go basis with NIC from current working population being used to pay those pensions

40
Q

Describe a ‘basic state pension’

A

Paid to people based on their retirement
Available for those who have sufficient NICs
‘Category B’ pension available for those who didn’t make enough NICs

41
Q

What was the original objective os SERPS (state earning related pension scheme)

A

To provide an additional 25% of national average earnings on top of basic state pension

42
Q

What was SERPS replaced by?

A

S2P State second pension

43
Q

What is the basic criteria for S2P?

A
  • only available for those who reached state pension age before 2016
  • available for employees paying class 1 NICs
  • employees are obliged to be in s2p unless they contract out
44
Q

Pension credit is made up of 2 non taxable elements, what are they?

A
  1. Guarantee credit (tops up someone’s weekly income)

2. Savings credit (additional payment for those aged 65+ who have money for retirement)

45
Q

Explain the key features of a single tier state pension…

A
  • there is a single level of benefit with no additional earnings related element
  • determined by someone’s NIC record
  • person needs to be credited 35 years NIC
  • basic solely on NIC record
46
Q

How is the basic state pension increased each year?

A
  • prices
  • earnings
  • 2.5%

CeMAP 1 (Unit one) (16 decks)

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