EIM76186 | Social security benefits: Employment & Support Allowance: Taxation

Part 10 Chapters 3 and 5 ITEPA 2003

Between 2008 and 2013, there were two forms of Employment and Support Allowance (ESA): Contribution Based ESA and Income Related ESA.

From 2013, income-related Employment and Support Allowance was consolidated (along with a number of other benefits) into a new payment called Universal Credit.

Contribution-based Employment and Support Allowance has been replaced with New Style Employment and Support Allowance, which is claimed separately from Universal Credit.

Contribution-based ESA (from 2008)

Contribution-based Employment and Support Allowance (ESA(C)) was introduced in 2008.

To qualify for ESA(C) the recipient must have paid sufficient National Insurance contributions in specified tax years, known as Relevant Income Tax Years.

ESA(C) is known as a contributory benefit because unless sufficient contributions have been paid there will be no entitlement.

ESA(C) is chargeable to tax as social security income. It is paid by the DWP subject to a modified system of Pay As You Earn.

From 2013, Contribution-based Employment and Support Allowance has been replaced with New Style Employment and Support Allowance.

New style ESA (from 2013)

New style ESA is chargeable to tax as social security income.

Income related ESA (from 2008)

Income Related ESA (ESA(IR)) was introduced in 2008.

If a person satisfies the generic conditions for entitlement to ESA but is not entitled to received ESA(C) then they may be entitled to receive ESA(IR).

ESA(IR) is not taxable.

From 2013, income-related Employment and Support Allowance was consolidated (along with a number of other benefits) into a new payment called Universal Credit.

Universal Credit (from 2013)

Universal Credit is not taxable.