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HMRC internal manual

Tax Credits Technical Manual

HM Revenue & Customs
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Social Security Income: Disregarded income

The Tax Credits (Definition and Calculation of Income) Regulations 2002, Reg. 7(3), Table 3

The following payments of social security payments are disregarded:

  • An Attendance Allowance
  • A Back to work bonus payable under the Jobseeker’s Act or Part 1 of the Welfare Reform Act 2007
  • A Bereavement payment under section 36 of the Contributions & Benefits Act
  • Child Benefit
  • A Christmas bonus payable under section 148 of the Contributions and Benefits Act
  • Council Tax Benefit
  • Disability Living Allowance
  • Disabled Person’s Tax Credit
  • Any discretionary housing payment paid under regulation 2 of the Discretionary Financial Assistance Regulations 2001
  • An ex-gratia payment made by the Secretary of State or the Department for Social Development in Northern Ireland) to a person over pensionable age to supplement Incapacity Benefit
  • Guardian’s Allowance
  • Housing Benefit
  • Income Support (unless chargeable to income tax under section 665 of the ITEPA 2003).
  • Incapacity Benefit which is:
    • short term payable at the lower rate or
    • payable to a person who received invalidity benefit before 13th April 1995
  • Industrial Injuries Disablement Benefit (except industrial death benefit) under section 94 of the Contributions and Benefits Act
  • Contributions-based JSA to extent it exceeds taxable maximum in section 674 of the ITEPA 2003
  • Income based JSA
  • Maternity Allowance
  • Severe Disablement Allowance
  • A Social Fund payment (including Winter Fuel payments).
  • Statutory Maternity Pay under Part 12 of the Contributions and Benefits Act.
  • Statutory Paternity Pay under Part 12ZA of the Contributions and Benefits Act
  • Statutory Adoption Pay under Part 12ZB of the Contributions and Benefits Act
  • Statutory Sick Pay under Part 11 of the Contributions and Benefits Act.
  • Working Families’ Tax Credit.
  • A payment to compensate for the non payment or loss of entitlement of Income Support, Jobseeker’s Allowance, Housing Benefit. A payment in lieu of milk tokens or the supply of vitamins under the Welfare Foods Regulations 1996.
  • An income related employment and support allowance payable under part 1 of the Welfare Reform Act 2007
  • Universal Credit

Disregard any increase for a dependent child that is payable with any of the above allowances or benefits listed in Table 3.

Disregard from Social Security income any amount deductible for income tax purposes for donations to charity under section 713 (the payroll deduction scheme) of the ITEPA 2003.

Statutory Maternity Pay, Statutory Sick Pay, Statutory Paternity Pay and Statutory Adoption Pay are excluded from social security income for tax credit purposes but are instead dealt with as employment income.