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What State Benefits are Taxable?

You don’t have to pay income tax on all types of UK state benefits. And even if the benefit you are receiving is taxable, you’ll only pay tax on earnings that go over the personal allowance.

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 benefits you have received.

Here are the current UK income tax rates:

 2020/20212019/2020
Personal allowance 0%£12,500£12,500
Basic rate 20%£12,501 to £50,000£12,501 to £50,000
Higher rate 40%£50,001 and £150,000£50,001 and £150,000
Additional rate 45%over £150,000over £150,000
Anita Forrest
About Anita Forrest

Anita Forrest is a Chartered Accountant turned entrepreneur who helps the self-employed gain financial confidence when it comes to running the numbers side of their business and filing tax returns with guides, templates and resources on the Go Self-Employed website.