Income.
When calculating income the following are taken into account-
Employment and Support Allowance page index
- Earnings from employment
- Self-employed earnings
- Some benefits (see below)
- Occupational pensions
- Personal Pensions
The earnings of your partner are treated as your income. "Partner" is defined as a member of a couple or as a husband or wife in a
polygamous marriage and "couple" is defined as -
- a man and a woman who are married to each other and are members of the same household or
- a man and a woman who are not married to each other but are living together as husband and wife or
- two people of the same sex who are civil partners of each other and are members of the same household.
- two people of the same sex who are not civil partners of each other but are living together as if they were civil partners
Earnings from employment
As well as wages and salaries, earnings from employment include-
- bonus or commission
- holiday pay
- loss of earnings payments paid to justices of the peace and local authority councillors,
- payments in lieu of notice,
- holiday pay
- retainers which are payments made for a period when no actual work is done, for example the employees of school meals services during school
holidays
- tips
- payments for expenses which are not wholly related to the employment such as travelling expenses between home and work and
any expenses that may be incurred in caring for a family member whilst the employee is at work
- awards of compensation under employment law
- Payments due to suspension from employment on medical or maternity grounds
- compensation paid on the termination of employment
It is the net income that is taken into account. Net income is gross earnings less income tax, Class 1 National Insurance contibutions and half
of any sum paid
by you towards an occupational or personal pension scheme.
Earnings from employment do not include-
- payments in kind
- periodic payments made because employment has ended through redundancy
- payments made for periods when an employee is on maternity leave, paternity leave, adoption leave or is away from work due to illness
- payments by an employer for expenses wholly, exclusively and necessarily incurred in the performance of employment.
- payments of occupational pension
- redundancy payments
- any lump sum payments received under the Iron and Steel Re-adaption Benefits Scheme
Self-employed earnings
When working out the earnings of someone who is self-employed the DWP will deduct annual expenses from the gross receipts and then divide these by
52 to get a weekly amount. For businesses that have been trading for less than a year the DWP will take a period that will give them the most accurate
calculation.
Income tax, National Insurance contributions and half of any premium paid for a personal pension scheme will also be deducted from the weekly amount.
Gross receipts of a business are defined as-
- any payments for goods and services provided
- earnings payable abroad, payments due to the business in a country outside the UK that prohibits the transfer of funds to the UK will be disregarded for
as long as that restriction remains
- Payments from any scheme designed to assist people to become self-employed
- Business subsidies or payments of compensation
- Personal drawings taken in anticipation of profits or business income. Drawings made in excess of profit are treated as capital
- Income from letting or sub-letting business premises or land
- Tips and gratuities
- Any VAT collected from customers that exceeds the amount paid to Her Majesty's Revenue and Customs during the assessment period
In calculating self-employed earnings the DWP will deduct from the total gross receipts any business expense that was paid wholly and exclusively for
the business, was paid out during the period being assessed, was reasonably incurred and is considered to be an allowable expense.
Allowable business expenses are defined as-
- Accountancy charges
- Advertising costs
- capital repayments used to either replace a worn out or outdated piece of equipment or to repair an existing asset.
- Cleaning of business premises
- Employees' wages before any deductions
- Employer's secondary Class 1 SS contributions
- heating and lighting
- income spent on the repair of an existing asset
- interest payable on a mortgage, loan, credit sale, consumer credit agreement or a hire purchase agreement. This does not include any capital
element
- legal fees for the running of the business but not those connected to either the setting up or the expansion of the business.
- Payment in kind for work done for the business
- Rent, council tax, water charges and insurance premiums on the business premises
- stationery
- stock purchases
- sundries
- telephone, fax or telex
- any VAT payments made to Her Majesty's Revenue and Customs during the assessment period
- transport costs (eg petrol, road tax, insurance and servicing)
The following are not allowable expenses-
- capital expenditure
- the depreciation of capital assets
- expenses used or intended to be used in setting up or expanding a business
- any loss incurred before the start of the assessment period or in any other employment
- repayment of capital on loans unless these are for the replacement of worn out or outdated piece of equipment or the repair of an existing asset
- business entertainment expenses
- losses incurred on the disposal of a capital asset
- payments into a contingency fund to safeguard against future bad debt
- personal drawings on income and capital
- money on goods used for personal consumption
Other income
Some benefits are taken fully into account when calculating income. These are-
- Bereavement allowance which is paid for not more than 52 weeks
- Carer's allowance which is payable to people providing care for someone in receipt of either Attendance Allowance or Disability Living Allowance
- Working tax credit
- Incapacity benefit (this only applies to your partner)
- Industrial death benefit
- Industrial injuries disablement benefit
- Conrtibution-based Employment Support Allowance (this only applies to your partner)
- Jobseekers Allowance paid to your partner
- Maternity Allowance which is paid for up to 39 weeks to women who cannot get Statutory Maternity Pay
- Retirement Pension
- Severe Disablement Pension. This is payable after six months of illness (this only applies to your partner)
- War Orphan's Pension
- Widow's Payment
- Workmen's Compensation (supplementation) Scheme
Payments of income from both occupational and personal pension schemes will be taken fully into account.
Other income wich is fully taken into account includes-
- Annuity income except for that derived from home income plans (which is partially disregarded) and gallantry awards which is disregarded in full
- Cash in lieu of concessionary coal paid by British Coal to former employees and their widows or widowers
- Ministry of Justice ex gratia incapacity allowances. These are paid in England and Wales to compensate people injured in prison workshops or on training
courses
- Income from an insurance policy except for income from a mortgage protection policy.
- Income from subletting parts of your home that aren't lived in (eg the garden or garage)
- Payments for loss of earnings or benefits paid to jurors or witnesses when attending court
- income from trusts set up from money paid because of a personal injury where this has been disregarded as captial
- income frome the assets of a business partly or wholly owned by you where this has been disregarded as capital
- income from the dwelling occupied as your home which has been disregarded as capital. Income from boarders or sub-lets is partially disregarded.
Benefits that are disregarded include-
- Attendance Allowance
- Constant Attendance Allowance
- Exceptionally Severe Disablement Allowance
- an attendance allowance paid under the Pneummoconiosis, Byssinosis and Miscellaneous Disease Benefits scheme
- payments for attendance under the Civilian's Personal Injury Scheme or any similar payment
- any paymentent for attendance which is part of a War Disablement Pension
- either component of Disability Living Allowance
- Christmas Bonus
- Child Tax Credit
- payments made to compensate for the total or partial loss of Housing Benefit
- Council Tax Benefit
- Discretionary housing payments
- Guardians Allowance
- Housing Benefit
- Mobility supplement
- War Pensioner's Mobility Supplement
- Payments from the Social Fund
- Concessionary payments of Attendance Allowances, Disability Living Allowance (care and mobility components), Job Seeker's Allowance, Income Support
and income-related Employment Support Allowance. Concessionary payments are made when "the intention to pay benefit cannot be achieved by a fault in
the law.
- payments made under the Supporting People programme
Other payments that are fully disregarded include-
- Payments for living and accommodation costs from people who normally live with you but are not either boarders or subtenants.
- payments of education support allowance or other payments to assis with non-advance education
- Special guardianship payments.
- Payments made under the repayment of teacher's loans scheme
- Payments made under the employment retention and advancement scheme (ERA)
- cost of the conversion of income paid in foreign currency to sterling
- fees, grants or loans made by an employment zone contractor
- annuity payments for any gallantry awards including those from foreign countries
- income which is payable in a foreign country and cannot be transferred to the UK. This usually occurs when the foreign country does not allow its
currency to be transferred to the UK.
- income in kind
- payments made to a juror or witness for attending court- this does not apply to any payments for loss of earnings.
- direct payments made by a local authority in lieu of community care services
- training allowances paid to young people in non-waged work based training
- New Deal allowances
The DWP disregards £10 from weekly income derived from-
- Payments made to victims of National Socialist persecution. These are payments made under German or Austrian law to victims of Hitler's government
- Payments from a War Disablement Pension
- Payments from a War Widow's or Widower's pension
- A guaranteed income payment from the Armed Forces and Reserve Forces Compensation Scheme
- Payments ffrom the Widowed Mother's Allowance
- Payments from the Widowed Parent's Allowance
Payments of interest provided by means of an annuity which has been taken out as part of a home income plan are fully disregarded. The rest of the
income from the annuity is taken into account.
If you provide board and lodging accommodation in your own home, £20 plus half of the remaining weekly payment for each person is disregarded.
Accommodation provided by a close relative or by any other member of the family or not on a commercial basis is not classed as board and lodging
accommodation.
The first £20 of income of payments made by a subtenant will be disregarded.
Statutory Materninty Pay, Statutory Paternity Pay, Statutory Adoption Pay and Statutory Sick Pay are all taken into account less any income tax paid, any
National Insurance contributions and one half of any contribution paid to an occupational or pension scheme.
Payments for your home
Mortgage protection policy payments which are used to meet repayments on a mortgage or on a loan for certain repairs and improvements will
be disregarded in full.
Payments from any source are disregarded in full if they a intended and used as a contribution towards-
- payments on a loan secured against your home which are not covered by ESA
- interest payments for a loan which is a qualifying housing cost where those payments are not met in the applicable amount
- capital repayments for a loan which is a qualifying housing cost where those payments are not met in the applicable amount
- insurance policy premiums for mortgage protection or buildings insurance
- payments towards service charges, ground rent, a co-wnership scheme, a Crown tenancy and a tent where these are not met in the applicable amount
- rent on the home that is not met by Housing Benefit
