Find out which UK state benefits are taxable, meaning you may need to pay income tax on what you receive above the personal allowance. As well as which state benefits are tax-free.
Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.
State benefits that are not taxable
Here are the most common types of UK state benefits that you do not have to pay income tax on:
- Attendance Allowance
- Bereavement support payment
- Child Benefit
- Child Tax Credit
- Disability Living Allowance (DLA)
- TV licence for over-75s
- Guardian’s Allowance
- Housing Benefit
- Income Support
- Income-related Employment and Support Allowance (ESA)
- Industrial Injuries Benefit
- Lump-sum bereavement payments
- Maternity Allowance for the self-employed
- Pension Credit
- Personal Independence Payment (PIP)
- Severe Disablement Allowance
- Universal Credit
- War Widow’s Pension
- Winter Fuel Payments and Christmas Bonus
- Working Tax Credit
State benefits that are taxable
The most common UK state benefits that you’ll need to pay tax on include:
- Bereavement Allowance
- Carer’s Allowance
- Contribution-based Employment and Support Allowance (ESA)
- Incapacity Benefit from the 29th week you get it
- Jobseeker’s Allowance (JSA)
- Pensions paid by the Industrial Death Benefit scheme
- State Pension
- Widowed Parent’s Allowance
Once your taxable state benefit exceeds the personal allowance you’ll pay income tax. The amount you pay will depend on how much money you have received during the tax year from 6 April to 5 April each year.
Is Universal Credit Taxable?
Universal credit is not taxable and does not need to appear on your self-assessment tax return.