Carer’s Allowance – can deductible employment expenses help you qualify?
From 10 April 2017, the earnings threshold for Carer’s Allowance will be increased from £110 to £116 per week. However as the National Living Wage (NLW) rate has also been increased from £7.20 per hour to £7.50 per hour, if you are working 16 hours at the NLW you may still be at risk of losing all of your Carer’s Allowance.
Did you know that you may be able to make deductions in the calculation of your earnings to help you retain your Carer's Allowance payments? Here we tell you more.
Carer's Allowance (CA) is paid at a weekly rate of £62.70 to carers who help look after someone with substantial caring needs for at least 35 hours a week. The person who is cared for must receive either disability living allowance (middle or higher rate care component), the daily living component of personal independence payment, attendance allowance, armed forces independence payment or constant attendance allowance (at or above the normal maximum rate with an Industrial Injuries Disablement Benefit or basic (full day) rate with a War Disablement Pension).
You can find out more about CA on our website.
To get CA, you have to meet some conditions. One of them is that your earnings after allowable deductions must be no more than £116 per week (this was previously £110 per week). (‘Earnings’ includes money from employment and self-employment, but money you get from private or occupational pensions is not counted.) People with fluctuating earnings may be able to average their earnings over a certain period.
From 1 April 2017, someone aged 25 or over working 16 hours on the National Minimum Wage (NMW) will have earnings of £120 per week and is at risk of losing all of their CA.
A person in this position may be tempted to cut their hours so that they still qualify. However, depending on their circumstances, cutting their hours to below 16 could mean they no longer qualify for Working Tax Credit.
If you are affected, you may be able to make deductions from your earnings to help you keep your CA payments without having to cut your hours.
- Income tax and National Insurance contributions (NIC)
- Half of any contributions that you make into a work or personal pension
- Certain business expenses that you as an employee pay for but your employer does not reimburse. Such an expense must, as for income tax purposes, be incurred in the performance of the duties of the employment and be wholly, exclusively and necessarily incurred.
Examples of expenses for which deductions may be made are:
- special tools and clothing (sometimes a £60 flat rate deduction is available)
- professional fees and subscriptions
- telephone calls made entirely for work purposes
- business mileage or other work related travel expenses and any associated subsistence costs (if you use your own car business mileage can be deducted at up to 45p per mile)
- some costs of working from home
Please note that the deductions allowable under the Department for Work and Pension's (DWP) rules are separate to those allowable under HMRC's rules. However the DWP do cross refer to what HMRC allow for income tax purposes. You can find out more about the income tax treatment of employment expenses on our website.
You can also take off up to half of your earnings (after the above deductions if they apply) for amounts you pay to someone to look after either a child under 16 who you or your partner get child benefit for, or the person you are the carer for, when you are at work (so long as you pay someone other than a close relative).
If your earnings after deductions vary, you may still be able to claim CA for the weeks when they are below the £116 limit. The DWP also has the discretion to average your earnings over a five-week period, or a ‘recognisable cycle of work’ if you have one.
Should you need it to refer to, you can find the DWP Decision Makers Guidance dealing with the calculation of earnings on GOV.UK.
CA, although paid without tax taken off, is actually taxable income. Make sure you check that it is shown in your PAYE code, as discussed on our website
It is also counted as ‘social security income’ for tax credit purposes and ‘unearned income’ for universal credit. However if you receive CA, you may be entitled to an additional carer’s element of universal credit and have your capability for work assessment adjusted – you can find out more about CA and universal credit on the Carers UK site.
We are very concerned about this problematic CA/minimum wage interaction. It seems that there is a simple solution available – raise the earning threshold for CA automatically with the uprating of the minimum wage.
We have made representations to this end to the Government for example in our submission to the Department of Health’s consultation on how the Government can better support unpaid carers and hope that they will soon give the matter proper consideration.