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HMRC internal manual

PAYE Manual

HM Revenue & Customs
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PAYE operation: incapacity benefit: automatic uprating and recoding for CY+1

Incapacity Benefit is uprated at Annual Coding, in the same way as State Pension, from details supplied on magnetic tape by DWP.

The Incapacity Benefit estimate and the Incapacity Benefit actual indicator on the IABD screen are used in exactly the same way as the State Pension estimate and State Pension actual indicator. For more information about these signals see PAYE77060 ‘Incapacity benefit signals on PAYE service’.

Work Management items are produced during uprating for both State Pension and Incapacity Benefit cases.

There is no Incapacity Benefit equivalent to the form P46(DWP)(Slip) or form P173 for pensioners. This is because all Incapacity Benefit cases (except those dealt with by Leics and Northants (IBTO)) are automatically included in the uprating service whatever the level of Incapacity Benefit payable.

A deduction for Incapacity Benefit will not be included in the CY+1 tax code if a secondary Incapacity Benefit employment is not held in the CY+1 tax year. This is to avoid the possibility of Incapacity Benefit being carried forward when the Incapacity Benefit employment ceased prior to CY+1.

Details of the weekly rates of taxable Incapacity Benefit for CY+1 are given on the P242.

If Annual Coding has not yet taken place, but ‘NIB / IB Uprating’ is recorded in Contact History, you should not amend the benefit figure held in CY+1 IABD, unless exceptionally you receive correspondence to advise the rate of benefit has changed, following the DWP uprate.