Benefits for those who lose a partner – what does a 21st century system look like?

Published on 5 March 2012

The Government has consulted on a number of benefits issues over the last 18 months, claiming to be reviewing the welfare system and adjusting its design for the 21st Century. But do their plans really match their aims?

The DWP has been consulting on changes to bereavement benefit for those who lose a spouse or civil partner and find themselves in difficult emotional and financial circumstances as a result.

LITRG welcomed the opportunity to comment, building on the background of our report on bereavement and the complex interactions taxpayers can face with the tax, tax credits and welfare benefits systems.

The tax status of bereavement payments

Whilst outlining options for the shape of new payments providing bereavement support, the consultation is undecided on the tax status of such payments. Our response therefore recommends that early consideration be given to the tax interactions, with detailed consultation between the DWP, HMRC and interested external parties such as ourselves.

Arguably, it would be administratively straightforward for all concerned if such benefits were to be entirely tax-free. If, however, they are to be taxable, there are significant logistical challenges in ensuring that the tax system operates efficiently so as to ensure payments are taxed at source. Underpayments of tax and the potential distress of facing a later tax bill should be avoided at all costs.

Other concerns

Whilst welcoming the suggestion that bereavement benefit claimants should be encouraged to consider their work options at a time which is right for them, we wonder whether the position of those with limited ability to work, such as those with caring responsibilities for disabled children, has been fully considered.

Furthermore, we are concerned from current experience of Employment and Support Allowance and Jobseekers’ Allowance that encouraging claimants into self-employment could lead to adverse tax consequences if the associated support on HMRC compliance obligations continues to be non-existent or inadequate.

Our response also points out that if the contributions record of the deceased elsewhere in the EEA is insufficient to qualify a survivor for bereavement benefit, we believe that a challenge could be mounted under European law.

Shouldn’t bereavement benefit move with the times?

Finally, our response outlines concerns that the policy of bereavement benefit entitlement based upon marriage and civil partnership status is anachronistic. Moreover, it appears to be out of step with tax credits - and, in due course, Universal Credit - entitlement to which is assessed on a household basis looking at co-habiting couples regardless of marital status.

To read our full response, please use the link below:

Bereavement Benefit for the 21st Century - LITRG response


Contact: Kelly Sizer (please use form at