Tax Credits: Social security income

The general rule is that most taxable (meaning they are subject to tax – not that the individual necessarily pays tax on them) social security benefits are taken into account as income and non-taxable benefits are ignored. However, there are some exceptions to this general rule– for example income-based jobseeker’s allowance and carer’s allowance supplement are taxable but not counted as income for tax credits. You should check each individual benefit carefully.  

State retirement pension is not included as social security income but HMRC ask for it to be included as pension income under 'other income' in box 5.6 of the claim form (see below) - the significance is that the other income category is broadly the Step One equivalent and therefore eligible for the £300 deduction.

Welfare Supplementary Payments (WSP) were introduced in Northern Ireland only to reduce the impact of some welfare changes including the introduction of the benefit cap, changes to employment and support allowance and personal independence payment, loss of disability premiums/elements in certain benefits, loss of carer's allowance in some cases, universal credit and changes to housing benefit. Claimants may be eligible for more than one WSP if applicable. These are awarded automatically and there is no need to claim them. The broad principle is that the tax - and therefore tax credit - treatment of a WSP paid by the NI Executive follows the tax (and tax credit) treatment of whichever social security benefit they are topping up.

From summer 2021, child disability payment was introduced in Scotland, which will replace disability living allowance for children in Scotland. This payment does not count as income for tax credits.

Specifically, the following benefits are disregarded for tax credits, together with any child dependency increases payable with them – arranged alphabetically rather than in the order given in the Income Regulations:

* Note - statutory maternity, paternity, adoption, shared parental, statutory parental bereavement & sick pay are disregarded as social security income but they are treated as employment income.

There is some information on the In addition, the TC600 guidance notes show which benefits to include, although HMRC have withdrawn this publication since April 2019 and it has not been updated.

Last reviewed/updated 14 April 2022