Claiming Disability Allowance and other benefits

hendyphilhendy · Aug 24, 2009

I have just taken on a tax return client who is receiving Disability Living Allowance. They also had employment, interest, pension and divididend income taking their earnings up to nearly £20k.

I had assumed that the DLA would be a non taxable income; however, after putting into my software package I was surprised it included it in the comp.

I therefore read on the HMRC website and it appears that the income is taxable.

Have any other accountants come across this? I am sure it is normal but not a situation I have had before. The most strange thing is I am unable to find any definitive P60 or other such confirmation of income received in the year, and in particular whether any tax is deducted.

Also if anyone could help with some info on other social security benefits and their treatment it would be much appreciated.

Many thanks

Phil

taxattack · Aug 25, 2009

hendyphilhendy said:
I have just taken on a tax return client who is receiving Disability Living Allowance. They also had employment, interest, pension and divididend income taking their earnings up to nearly £20k.

I had assumed that the DLA would be a non taxable income; however, after putting into my software package I was surprised it included it in the comp.

I therefore read on the HMRC website and it appears that the income is taxable.

Have any other accountants come across this? I am sure it is normal but not a situation I have had before. The most strange thing is I am unable to find any definitive P60 or other such confirmation of income received in the year, and in particular whether any tax is deducted.

Also if anyone could help with some info on other social security benefits and their treatment it would be much appreciated.

Many thanks

Phil

I'm a bit puzzled. DLA is among the benefits listed as wholly exempt from tax under S677 Itepa 2003. The HMRC website agrees:

http://www.hmrc.gov.uk/incometax/taxable-income.htm

Chris

Accounting Solutions · Aug 25, 2009

100% agree with Chris, DLA is tax exempt. If you are doing the tax return online there is a seperate part which asks you about benefits, one box provides for taxable benefits and the other non-taxable.

hendyphilhendy · Aug 25, 2009

Many thanks for both these posts. It was late last night when I looked at this. Having reviewed this morning I found the correct answer!

I had included it in my software package as incapacity allowance, which comes under the category of incapacity benefit. I don't even need to declare DLA on my return at all, I just thought I was being efficient.

It does seem rather confusing with all these different types of benefit!

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