Which benefits are taxable?

Hi all, sorry to bother you but I just received a perturbing letter from Inland Revenue and would be very grateful for any advice, thanks!
I am 53 yrs old, and only worked full time between 1983-1991 inclusive, when I was retired due to ill health and started receiving a small Civil Service pension which is continuing.I was under the genuine impression that this would always be a nontaxable income?
Benefit wise, I receive ESA ( I am in the Support Group), I do not know if I am recognised as contributory or non- contributory, but again always assumed this was another income that is exempt from taxation and I was transferred over from DLA to PIP this summer ( lower rate home care and lower rate Mobility).
The letter states that for year 2014/15, my tax allowance is £10,000 but that I have two incomes that reached £10,500 for that period, namely my ESA added to my Works Pension, so I owe tax arrears of just iver £100! If this is correct, then fair enough, but is PIP ever taxable or is there any danger the rules may change in future?
I realise that I could just phone Inland Revenue, but I am unsure if working for those 8 years would have been sufficient for me to be regarded as contributory or non contributory for ESA purposes?? Hope someone can help, thanks again.

benmonspe wrote: Hi all, sorry to bother you but I just received a perturbing letter from Inland Revenue and would be very grateful for any advice, thanks!
I am 53 yrs old, and only worked full time between 1983-1991 inclusive, when I was retired due to ill health and started receiving a small Civil Service pension which is continuing.I was under the genuine impression that this would always be a nontaxable income?
Benefit wise, I receive ESA ( I am in the Support Group), I do not know if I am recognised as contributory or non- contributory, but again always assumed this was another income that is exempt from taxation and I was transferred over from DLA to PIP this summer ( lower rate home care and lower rate Mobility).
The letter states that for year 2014/15, my tax allowance is £10,000 but that I have two incomes that reached £10,500 for that period, namely my ESA added to my Works Pension, so I owe tax arrears of just iver £100! If this is correct, then fair enough, but is PIP ever taxable or is there any danger the rules may change in future?
I realise that I could just phone Inland Revenue, but I am unsure if working for those 8 years would have been sufficient for me to be regarded as contributory or non contributory for ESA purposes?? Hope someone can help, thanks again.

Hi bm,

Contribution Based (CB) ESA is taxable income, Income Related (IR) ESA isn't !

"I am 53 yrs old, and only worked full time between 1983-1991 inclusive, when I was retired due to ill health and started receiving a small Civil Service pension which is continuing.I was under the genuine impression that this would always be a nontaxable income?"

I am no Tax expert, but as far as I am aware Works/Occupational Pensions have always been classed as taxable income.

"Benefit wise, I receive ESA ( I am in the Support Group), I do not know if I am recognised as contributory or non- contributory, but again always assumed this was another income that is exempt from taxation and I was transferred over from DLA to PIP this summer ( lower rate home care and lower rate Mobility)."

Being in the Support Group (SG) is not relevant to your query, as you can receive CB ESA alone, IR ESA alone, or CB ESA with IR ESA top-ups when in either group. (WRAG or SG)

As stated in my opening paragraph CB ESA is classed as taxable income, IR ESA isn't !

"DLA to PIP this summer ( lower rate home care and lower rate Mobility).
The letter states that for year 2014/15, my tax allowance is £10,000 but that I have two incomes that reached £10,500 for that period, namely my ESA added to my Works Pension, so I owe tax arrears of just iver £100! If this is correct, then fair enough, but is PIP ever taxable or is there any danger the rules may change in future?"

If you are being paid CB ESA, and when your CB ESA is added to your Works Pension you exceed your Income Tax Personal Allowance, the excess will be liable to Income Tax.

DLA was never classed as Taxable Income, neither is PIP.

I cannot predict future events, and therefore cannot comment on whether PIP may become Taxable Income in the future.

" I realise that I could just phone Inland Revenue, but I am unsure if working for those 8 years would have been sufficient for me to be regarded as contributory or non contributory for ESA purposes?? Hope someone can help, thanks again."

If you last received NI Contributions from employment in 1991, that would not give you entitlement to payment of CB ESA currently, as it is the last two relevant Tax Years that are used for entitlement to CB ESA. (currently 2012/13 and 2013/14)

However, if you were previously in receipt of Incapacity Benefit (IB) which was a Contributory Benefit, as you did have enough NI Contributions when you first claimed it, and were successfully transferred over to ESA from IB you would still be entitled to payment of CB ESA.

What will I be transferred to?

You need to clarify this with DWP ESA.

bro58