Taxable State Benefits
The following benefits count as taxable income and must be included when calculating your Income Tax:[1]
- State Pension (both basic and new)[3]
- Jobseeker’s Allowance (contribution-based)[2]
- Employment and Support Allowance (contribution-based, except the support component)
- Carer’s Allowance
- Bereavement Allowance (the old scheme, not the new Bereavement Support Payment)
- Widowed Parent’s Allowance
- Incapacity Benefit (from the 29th week)
- Industrial Death Benefit (pensions)
Important: “Taxable” doesn’t necessarily mean you’ll pay tax. If your total income (including taxable benefits) is below the Personal Allowance (£12,570), you won’t owe any tax.
Tax-Free State Benefits
These benefits are not taxable and don’t need to be reported:[1]
- Universal Credit
- Housing Benefit
- Child Benefit (tax-free, but HICBC may apply if higher earner exceeds £60,000)
- Disability Living Allowance (DLA)
- Personal Independence Payment (PIP)
- Attendance Allowance
- War Disablement Pension
- War Widow’s/Widower’s Pension
- Maternity Allowance
- Bereavement Support Payment[4]
- Guardian’s Allowance
- Council Tax Reduction
- Winter Fuel Payment
- Christmas Bonus
How Tax Is Collected on Benefits
For most taxable benefits, the tax is collected through your PAYE tax code. HMRC estimates the amount you’ll receive and adjusts the tax code on your other income (pension, employment) to collect the tax throughout the year.[1]
If you don’t have other PAYE income, you may need to file a Self Assessment return to report and pay tax on your taxable benefits.[5]
Child Benefit and HICBC
Child Benefit itself is tax-free, but if you or your partner earn over £60,000, the High Income Child Benefit Charge effectively claws some or all of it back. See our HICBC guide for details.
Frequently Asked Questions
Is Universal Credit taxable?
No. Universal Credit is completely tax-free and does not need to be reported on your tax return.
Which state benefits are taxable?
Taxable benefits include the State Pension, contribution-based Jobseeker’s Allowance, contribution-based Employment and Support Allowance, Carer’s Allowance, and Widowed Parent’s Allowance.
Is PIP (Personal Independence Payment) taxable?
No. PIP is a tax-free benefit and does not count towards your taxable income.
Do I pay tax on the State Pension?
The State Pension is taxable income, but no tax is deducted at source. If your total income including the State Pension is below the £12,570 Personal Allowance, you will not owe any tax.
Further Reading
- Personal Allowance & Tax Bands — how much you can earn tax-free
- High Income Child Benefit Charge
- Tax on Pensions — State Pension and private pension tax
- Tax Codes Explained
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Sources
- Tax-free and taxable state benefits — GOV.UK
- Jobseeker's Allowance — GOV.UK
- State Pension — GOV.UK
- Bereavement Support Payment — GOV.UK
- Self Assessment tax returns — GOV.UK