Benefits Expert: ‘Why must I pay tax on my ESA?’

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Q Do I qualify for any help with my Council Tax of £671 a year? I am 85 with a State Pension of £130.77 a week, a company pension of £37.66 a week and savings of £15,750.

Mr P. Houghton.

A You are due a Council Tax reduction of about £8 a week backdated for three months. You will lose entitlement to any help, however, if your savings go above £16,000.

Q I have been on the sick since 1992 and was recently transferred from Incapacity Benefit (IB) to Employment and Support Allowance (ESA). HM Revenue and Customs tell me that because ESA is taxable I must now pay extra tax on my works pension and I could owe them £290.

Why must I pay tax on my ESA when I have never had to pay it on my sick benefits before?


A IB is taxable for most people after they have been receiving it for 28 weeks. However, the rules are different for IB recipients like you who were transferred from Invalidity Benefit (IVB) when it was replaced by IB in April 1995.

As IVB was not taxable those who were transferred from it were also allowed to receive their IB tax free.

Currently everyone on IB is gradually being transferred to ESA. ESA is taxable for all and there are no such exceptions this time.

Q My 91-year-old mother is in a nursing home but has to pay more in fees than she has coming in.

Before being admitted she received the Severe Disability Addition but this has now stopped.

The benefit assessment team says she is entitled to it but the Department for Work and Pensions say she is not because she owns her former home valued at £80,000. Should she be receiving this money?

Bill (Roker).

A The Severe Disability Addition (SDA) is not a separate benefit. It is extra cash added to benefits like Pension Credit (PC) for certain disabled people.

People in nursing homes must pay their fees in full if their capital is over £23,250 but they may be eligible for PC depending upon their finances.

When your mother lived at home she was entitled to PC as her income was assessed as being below the PC level. This level included the SDA. Now she is in the nursing home the value of her former home will be taken into account and treated as income of at least £140 a week. This has probably pushed her assessed income above the level where she could qualify for PC, even though this level still includes the SDA.