Tax Credits: Social security income
For tax credit purposes, taxable social security benefits are taken into account as income and non-taxable benefits are ignored. There is some information on the https://www.gov.uk/guidance/tax-credits-working-out-income. In addition, the TC600 guidance notes show which benefits to include, although HMRC have withdrawn this publication since April 2019 and it has not been updated.
State retirement pension is not included here 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) have been 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 will be introduced in Scotland, which will replace disability living allowance for children in Scotland. When it is introduced, there will be no change to the amount claimants receive. We will update this page when more information is available.
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:
- attendance allowance;
- back-to-work bonus;
- bereavement support payment;
- carer's allowance supplement (Scotland)
- child benefit;
- Christmas bonus;
- council tax benefit;
- disability living allowance;
- disabled person’s tax credit (discontinued);
- any discretionary housing payment;
- income-related employment and support allowance;
- guardian’s allowance;
- health in pregnancy grant (discontinued January 2011);
- housing benefit;
- short-term lower rate incapacity benefit;
- incapacity benefit payable to someone who had previously been on invalidity benefit and paid continuously since before 13 April 1995;
- an ex-gratia supplement to incapacity benefit payable to a person over pensionable age;
- non-taxable income support (i.e. income support payable in certain circumstances to the claimant who is on strike or their partner);
- contribution-based jobseeker’s allowance in excess of the taxable maximum set out in ITEPA 2003, section 674;
- income-based jobseeker’s allowance
- industrial injuries benefit (except industrial death benefit);
- a payment of compensation for loss of entitlement to income support, jobseeker’s allowance or housing benefit;
- a payment in lieu of milk tokens or supply of vitamins
- maternity allowance
- new enterprise allowance
- pension credit (guarantee and savings credit);
- severe disablement allowance;
- a social fund payment;
- statutory adoption pay*;
- statutory maternity pay*;
- ordinary and additional statutory paternity pay*;
- statutory shared parental pay*;
- statutory parental bereavement pay*
- statutory sick pay*;
- working families’ tax credit (discontinued);
- personal independence payment.
* 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.
Last reviewed/updated 12 July 2021