The UK government provides countless benefits to its citizens, from state pensions to child support. But are all state benefits applicable to taxes?

Join us as we explore the state benefits provided by the UK government in detail. Firstly, we will look at some of the tax-free state benefits for which you do not pay taxes. Then we will mention other state benefits for which you have to pay additional taxes. Let’s get to it!

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Tax-Free State Benefits

You will be surprised to learn that most state benefits are not taxed by the government. There are countless benefits that you can receive without paying a single penny in tax. Following are some of the state benefits that are not subject to taxes:

1. Attendance Allowance

People living in the UK who are over the state pension age and have a physical or mental disability are provided with an attendance allowance. This allowance is not taxed by the UK government and can be claimed in addition to the Personal Independence Payment (PIP) or Disability Living Payment.

2. Bereavement Support Payment

If you have a child and you have lost a spouse after April 6, 2017, you are provided with bereavement support payments (BSP). This allowance is not taxed and provides you with the initial payment of £3,500, followed by 18 monthly payments of £350.

3. Child Benefit

Child benefit is another payment that the UK government provides to its citizens for children under the age of 16. For the first child, you are given £24.00 per week, whereas for the subsequent children, you are given £15.90 per week. This support is also tax-free.

4. Disability Living Allowance

If you are under 16 and disabled, you are provided with a disability living allowance (DLA). This allowance has two components: a care component and a mobility component. The UK government does not charge you any tax for this allowance, but you must be living in the UK.

5. Guardian’s Allowance

If you are raising a child whose parents have passed away, you will be given a guardian’s allowance. You will receive a total of £20.40 per week for each child. The payments received are not subject to taxes.

Other Tax-Free State Benefits

In addition, the following state benefits are also not taxed:

• Child tax credit
• Free TV licence for people over 75
• Housing benefits
• Income support if you are not involved in a strike
• Industrial injuries benefit, etc.

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State Benefits Applicable to Taxes

Nevertheless, there are state benefits for which you have to pay tax. You must ensure that if you are benefiting from any of these allowances, you file your taxes accurately. Following are some of the major benefits subject to tax:

1. Carer’s Allowance

If you are receiving an allowance from the government for taking care of an elderly person or a disabled person, it will be subject to income tax. The allowance improves the financial security of carers while compensating for the costs associated with basic needs.

2. Employment and Support Allowance (ESA)

Among the state benefits applicable to taxes is the employment and support allowance (ESA). This is paid to people who are unable to work due to a chronic illness or a disability. However, to be eligible for it, you must have paid national insurance contributions in the past.

3. Widowed Parent’s Allowance (WPA)

The widowed parent’s allowance (WPA) is provided to those parents who have lost a child under the age of 18. To be eligible for this allowance, the deceased must have lived with their parents. The payments received from the allowance are subject to income tax.

4. Jobseeker’s Allowance (JSA)

If you have paid a certain amount of national insurance contributions and are looking for a job, you will be provided with JSA. This amount will also be taxed by the UK government as income tax.

5. The State Pension

The elderly citizens of the UK who have participated in the national insurance coverage for 10 years are provided with pensions. These pensions are provided to people until the age of 66 and are taxed by the UK government.

Other State Benefits Applicable to Taxes

There are several other benefits that are also taxed by the government. These include:

• Bereavement allowance
• Incapacity benefit
• Industrial death benefit scheme

Summing it Up!

Are all state benefits applicable to taxes? No, but you have to navigate the tax structure to learn more. There are countless schemes for which the government applies an income tax, such as carer’s allowance, ESA, WPA, and JSA. On the contrary, benefits such as child benefits, attendance allowance, and guardian’s allowance are not taxed.

However, it can be difficult to understand if you are paying the tax to avoid regulatory fines. Therefore, we recommend getting professional help from tax advisors for advanced tax planning and filing.

Arrange a virtual meeting with CruseBurke to learn whether you are paying the right amount of taxes. We will provide you with the best tax advisory services in the UK.