Help for employees and the self-employed
Disabled people and carers
Whilst the number of disabled people in work has risen over the last ten years, there are still many who are not in work but want to be. Here we discuss what help is out there for employees – and those who are self-employed.
The government want to improve employment support for disabled people and those with health conditions. However, against this backdrop, it is perhaps disappointing that in general, the tax and National Insurance rules themselves give little additional and specific support for people with disabilities. Currently, help, as there is, comes in three ways:
- Small adjustments to the tax rules to acknowledge disability – the blind person’s allowance (BPA) is perhaps the most well-known acknowledgement of disability in the tax system.
- Assistance through the Access to Work scheme – not a tax programme but has tax implications.
- The extra payments included in tax credits/universal credit for those with disabilities.
What is the blind person's allowance (BPA)?
The BPA allows you to receive an additional amount of income without having to pay tax. It does this by increasing your personal allowance.
The BPA is described in the tax basics section. Importantly, you do not have to be entirely without sight to claim the BPA and although entitlement to the allowance is not dependent on age, we know that the likelihood of poor eyesight increases in older age and the BPA goes unclaimed by many who are entitled to it. The BPA is not given automatically, you must make a claim for it.
What tax relief and exemptions are available for disabled employees?
Expenses or benefits that are paid for by an employer, for an employee's personal use, are usually taxable. There is no general exemption for disabled employees but there are some relaxations to the rules and a few specific exemptions which should be considered.
We explain the following:
- Tax relief for equipment services and facilities
- Tax relief for home to work travel
- Tax and the provision of cars and fuel
- Other tax reliefs
Tax relief for equipment, services and facilities
Normally where an employer provides equipment or services to an employee for private as well as business use, a taxable benefit will arise. However, if an employee is disabled, and the employer makes available any equipment, services or facilities to enable them to take up or stay in work, then no taxable benefit will arise even if there is substantial private use. This tax exemption is subject to the following conditions:
- The employer must make similar benefits available to all of their disabled employees.
- The main purpose of the benefit must be to enable the employee to do their work.
- Either the benefit is one that the employer must offer under the terms of the Equality Act (EA) 2010 or similar legislation, or it is provided under the Access to Work programme.
Examples of the equipment or services which might be provided include:
- a hearing aid;
- a wheelchair;
- a reader for someone with a visual impairment;
- a support worker for practical help in getting to and from work;
- new equipment or alterations to existing equipment; or
- alterations to the premises to accommodate the employee.
Note also that this exemption only applies where the employer or a third party meets the cost. Disabled employees cannot claim a tax deduction for costs which they bear themselves and are not reimbursed by their employer.
Some further details of this exemption can be found in HM Revenue & Customs' (HMRC) Employment Income Manual on GOV.UK.
Tax relief for home to work travel
In general, there are strict rules which ensure that the costs an employee incurs in travelling between home and work cannot usually be claimed as an allowable expense against their taxable income. If an employer pays or reimburses the cost, then this amount becomes a taxable payment.
However, no income tax or National Insurance contributions (for either the employer or the employee) are payable if transport is provided between home and work for a disabled employee, or if the employer pays for such transport or reimburses the expense incurred.
Note that again disabled employees cannot claim a tax deduction for such costs which they bear themselves and are not reimbursed by the employer.
The definition of disability for this purpose is 'a physical or mental impairment which has a substantial and long-term adverse effect on his ability to carry out normal day-to-day activities'. This draws on the definition of disabled person in EA 2010, however the EA 2010 meaning is more wide reaching than the tax meaning, therefore it is important that you are aware that there could be some circumstances where a disabled employee does not qualify for tax exemption even though that employee may be within the meaning of 'disabled person' for other purposes. See HMRC’s Employment Income Manual on GOV.UK for more information.
Tax and the provision of cars and fuel
In general, a taxable benefit charge on the provision of a company car and/or fuel can only be avoided by an employee where the car and/or fuel are only available for business use. However, these rules have been adapted to remove or reduce the charge for disabled employees.
For example, there are circumstances in which a disabled employee is not taxed if the employer provides a car or fuel or pays or reimburses any related expense. This is where:
- the car is specially adapted for the employee’s use, or fitted with automatic transmission because the employee cannot use a manual gearbox, and
- the employee uses the car only for business travel or for ordinary commuting between home and work (and travel to training).
You can find confirmation of this rule in HMRC's Employment Income Manual on GOV.UK. The definition of disability for this purpose is that of 'a physical or mental impairment which has a substantial and long-term adverse effect on his ability to carry out normal day-to-day activities'. See HMRC's Employment Income Manual on GOV.UK for further important information about this definition.
This exemption is highly restrictive as it prohibits any private use of the car. Private use might include a call to the doctors on the way home from work, or regular small detours to a newsagent on the way to work. If the employee's use of the car strays into these realms, then the car and fuel benefit should be reported to HMRC by the employer (on form P11D) and you may have to pay tax on the value. It is therefore easy to trigger inadvertent financial consequences here, so it is important to be aware of the rules.
Whilst the car benefit charge cannot be avoided if there is to be any private use of the vehicle, the fuel charge can be removed by the disabled employee paying for all private use fuel.
In cases where there is a car benefit charge to calculate, there are a number of differences that may apply to reduce the value of the car benefit charge for disabled employees, which we will go on to discuss below.
Specific rules for calculating company car benefit for disabled employees
In order to calculate any car benefit charge for an employee you need to know:
- the list price of the car at the date of registration;
- the cost of any accessories fitted to the car initially or added later; and
- the carbon dioxide (CO2) emissions of the vehicle.
Adjustments can sometimes be made to reduce these figures where a disabled employee uses the car. As these figures form the basis of the calculation of the tax charge, any reduction in them will reduce the amount of the taxable benefit too. The possible adjustments are as follows.
When calculating the benefit for an automatic car, the list price of the equivalent manual car should be used in the calculation if it is lower, provided the disabled person must use an automatic version because of their disability. To qualify the disabled person has to hold a disabled person’s parking badge (often known as a blue badge). People with hidden disabilities such as anxiety and dementia may be able to apply for blue badge car parking permits from 30 August 2019. For more information, see our news item: Did you know that certain tax reliefs come with having a blue badge?.
In a similar fashion, the CO2 emissions figures for an equivalent manual car should also be used.
Any special equipment designed solely to enable a disabled person to use a company car is exempt from tax if provided by an employer. So, the value of accessories that are added to convert a car for a chronically sick or disabled person can be ignored, such as fittings to enable a wheelchair user to drive the car or hand controls for people unable to operate ordinary pedal controls.
Additionally, the value of certain other accessories can be ignored where they:
a) are included in a car provided to an employee who holds a disabled person's parking badge when the car is first made available, and
b) are made available for use with the car because that equipment enables the employee to use the car despite the disability which entitled him or her to hold the parking badge.
What this means is that if an employee who holds a disabled person's blue badge is provided with non-standard ‘generic’ accessories (such as power steering) because the employee requires that accessory to overcome his disability, these accessories are disregarded when calculating the car benefit charge.
You can find a useful summary of the special car benefit rule adjustments for disabled drivers in HMRC’s Employment Income Manual on GOV.UK.
Employers are able to help eligible employees to secure any tax relief on benefits that they are entitled to by dealing with benefits and expenses form P11D correctly. If this does not happen for whatever reason, you may need to make an adjustment to the P11D figure on your Self Assessment tax return if you complete one (you may need to ask a professional adviser or a body like the charity TaxAid to help you). Those who do not currently complete a Self Assessment should phone HMRC to discuss what to do to ensure the correct tax treatment.
Other tax reliefs
Termination payments: when an employment ends, an employer will sometimes make a final payment to the employee, which might include compensation for losing their job or payment in lieu of notice.
This is a complex area, and payments can be entirely exempt from tax, partially exempt from tax or fully taxable, depending on the nature of payment and circumstances in which it is made. However, a payment or benefit provided ‘on account of’ a disability of an employee when an employment ends will generally not be taxable.
Go to HMRC's Employment Income Manual on GOV.UK to find out more and see examples of what HMRC mean by ‘on account of’ a disability.
Business travel: if a director or employee needs a spouse or partner to travel with them overseas on business trips because their health is so poor that they cannot undertake foreign travel unaccompanied, the director or employee should not be charged tax if their employer bears the costs of their spouses or partner's travel. This includes reasonable hotel expenses.
You can find more information about this in HMRC's Employment Income Manual on GOV.UK.
Medical treatments: An employer can make a contribution of up to £500 a year for each employee on medical treatments recommended by a health care professional.
You can find more detailed information about this in HMRC’s Employment Income Manual on GOV.UK.
What about if I am a self-employed disabled person?
Self-employment is considered important for disabled people because it may offer a more convenient and flexible method of working. A self-employed person is someone who runs his or her own business or earns money on a freelance basis. You may be running the business in your own name as a sole trader or in partnership with others.
It is important to be sure that HMRC accepts that you are self-employed and further advice on this and other self-employed issues can be found in the self-employment section.
⚠️ Important note: The distinction between employment and self-employment is not always clear; some businesses try to exploit people looking for work, by treating them as self-employed when they should be treated as an employee. This can save the business money. In this situation it is important for you to work out for yourself whether you are really self-employed. If your research suggests you should be employed rather than self-employed, you should talk to your employer. If this doesn’t work, you may wish to consider whether to report the employer to HMRC.
If you are genuinely self-employed, as with employment income, there is no blanket tax exemption or deduction for the extra costs you incur on account of your disability. However any expenditure which is wholly and exclusively incurred for business purposes can be deducted from your taxable business income. This could include adjustments made to your office premises to accommodate you as well as books in special formats and specialist equipment.
What is the Access to Work scheme?
The Access to Work scheme is run by the Department for Work and Pensions (DWP) and gives grants to help people start working or stay in work. This includes self-employment. You may qualify for help if you are disabled or have a health or mental health condition. You can find a basic guide on GOV.UK.
There is a different system in Northern Ireland. You can find out more from NI Direct.
We look at the following:
- Am I eligible?
- What can the money be used for?
- What if I want to employ a support worker?
- What do I have to report for tax purposes?
- As an employee
- As an employer or as a selfemployed individual or partner
Am I eligible?
You will only be eligible if your employer is based in England, Scotland and Wales. As mentioned above there is a different system in Northern Ireland – see NI Direct for more information.
To qualify you must be aged 16 or over and in a paid job (including apprenticeship, work trial or internship) or self-employed (information on eligibility for self-employed awards can be found in the Access to Work staff guide). You can also qualify if you are about to start a job or work trial etc. It is not available for any voluntary work.
You might also qualify if you are getting new enterprise allowance (NEA) (but not during the mentoring phase for customers who started NEA on or after 5 January 2015).
The main requirement is that the disability or health condition you have affects your ability to do your job or means you have to pay extra work-related costs.
You might not be able to qualify if you receive certain benefits. You should speak to the Access to Work helpline to find out more.
What can the money be used for?
Access to Work grants can contribute to the additional employment costs resulting from disability, that an employer would not normally be expected to fund. The money can be used to pay for a wide range of things such as: adaptations to the equipment you use, to purchase special equipment, meet your fares to work if you can’t use public transport and even provide a support worker to help you in your workplace. If your work has been affected by the coronavirus situation, then Access to Work could help as we explain in our news article. You can apply for help whether you are employed or self-employed.
Access to Work does not provide the support itself, but provides a grant to reimburse the cost of the support that is needed. An application has to be made by the self-employed person or employee (not their employer), so that an assessment can be made of their needs in the workplace and the appropriate level of grant can be calculated and arranged.
Access to Work can pay up to 100 per cent of the approved costs if an individual is:
- Unemployed and starting a new job
- Working for an employer and have been in the job for less than six weeks
Access to Work will also pay up to 100% of the approved costs of help with:
- Support workers
- Fares to work
- Communicator support at interview
Note that Access to Work grants may be subject to a limit of double the national average salary (from 1 April 2020, the limit is £60,700). You can find out more about the cap in the Access to Work customer factsheet on GOV.UK.
In some cases, there may have to be an arrangement where DWP pays a proportion of the costs, for example where the Access to Work customer is working for an employer, they've been in the job for six weeks or more and they need special equipment or adaptations to premises.
You can find more information about what Access to Work can be used for in the Access to Work staff guide.
What if I want to employ a support worker?
You may want to use your grant to employ someone to support you (a support worker). If you are self-employed, taking on a support worker is similar to taking on a personal assistant using a social care direct payment or NHS personal health budget. It means you could become an employer and need to think about paying wages, tax, National Insurance and employment law. Our page on independent living gives more information on how to deal with becoming an employer.
If you are an employee, it may be that your employer gets the grant to employ a support worker for you, in which case they deal with the consequent employer and tax obligations. If you get the grant yourself and use it to take on a support worker, then you could become an employer, as per the above.
We have recently heard of a third scenario where an employed Access to Work recipient seems to have taken on a support worker themselves and Access to Work are paying the support worker directly (gross). If the hallmarks of an employment relationship between the claimant and support worker are present, a responsibility for operating PAYE etc. still exists. Our understanding is that, under general principles, this actually sits with the claimant (as employer) even if they are not the one administering payment. We are concerned that in this situation, and in the absence of any specific agreement/understanding with HMRC, the claimant is at risk of being found non-compliant by HMRC by failing to operate PAYE. We have raised these concerns with DWP.
What do I have to report for tax purposes?
There is very little factual guidance on this from HMRC or DWP. We outline below our view of how Access to Work grants should be treated for tax purposes, however as this is not entirely clear, you should speak to the Access to Work helpline and HMRC to clarify the position based on your circumstances.
As an employee
If you have received Access to Work funding yourself, for example for travel costs, you do not need to report anything to HMRC as the grant is not taxable income if it is spent entirely on the costs it is intended to reimburse.
If you are an employee, your employer may receive part of the grant, for example to cover expenses of equipment that they provide for you or to employ a support worker to assist you. This is different to you taking on a support worker personally, which could result in obligations on you as an employer, as mentioned above.
You will not be taxed on the value of those items or cost of providing a support worker as a personal ‘benefit-in-kind’. The tax rules specifically prevent a tax charge arising in those circumstances. For anyone with a technical interest in the law, this protection can be found in the Income Tax (Benefits in Kind) (Exemption for Employment Costs Resulting from Disability) Regulations 2002, SI 2002/1596.
As an employer or as a self-employed individual or partner
Generally, grants have to be accounted for in the business’s accounts. There is no specific exemption from tax for Access to Work grants, so we have to rely on normal accounting practice which says that government grants have to be accounted for in the business accounts. For those with an interest in the technical detail, this is in accordance with FRS102 which explains how government grants should be dealt with.
Employers or the self-employed should therefore:
- include the full amount of the Access to Work grant for the relevant period as ‘income’ in their accounts (the relevant period being date of receipt if accounts are prepared on the ‘cash basis’, or the period for which payment is due if preparing accounts on the ‘accruals basis’)
- deduct the full expense of equipment provided or paying a support worker as an expense (again on a ‘cash’ or ‘accruals’ basis depending on your elected method of accounting).
By and large, this should mean there is no effective tax charge as the amount of the grant and the expense incurred will often match (indeed, we understand that usually Access to Work operates by the expense first being incurred and then reimbursed on submission of receipts, so often match exactly).
Where this will not be the case is where the cost of support provided to the employee does not match the amount of the grant. Say, for example, the Access to Work scheme has approved a cost of £200 for a certain piece of equipment for the eligible employee, but the employer decides to help their employee further by choosing a more expensive model for £300. We understand this is perfectly permissible under the Access to Work scheme, but the grant will only cover the lower amount of £200 if that is adequate for the employee’s needs. The employer will include £200 of grant income in their accounts, then claim a deduction of £300 for the expense incurred. By following the principle of including the grant in full, then claiming the deduction in full, the accounts will always produce the right result – that is, that the employer gets a ‘net’ expense of £100 relieved for tax purposes for the support they have provided over and above the grant.
Such a mismatch in grant income and cost can also occur where the national average salary cap applies or where Access to Work only covers a percentage of the costs, as can be the case when an employee has been working for six weeks or more in a job but then applies for a grant.
How might tax credits help?
Tax credits are made up of working tax credit (WTC) and child tax credit (CTC). You can claim either or both of them if you meet certain conditions which means most people can no longer make a brand new claim for tax credits and are expected to claim support through universal credit (UC) or pension credit instead.
UC is a new benefit which is gradually replacing 6 other working-age means tested payments: housing benefit, income-based jobseeker’s allowance, income-related employment support allowance, income support, child tax credit and working tax credit. UC is normally paid monthly in arrears (although alternative payment arrangements are available) and based on the claimants’ circumstances in the previous monthly assessment period.
Until 27 January 2021, there was an exception to this rule, if you were entitled to the severe disability premium in certain existing benefits or had recently been entitled (although the benefit had ended, you continued to meet the entitlement conditions for the severe disability premium). From 27 January 2021, this exception has ended and you can no longer make a brand new claim for tax credits. A transitional severe disability premium element will be included in the calculation of your universal credit award instead.
Existing tax credit claimants will eventually be moved across to UC. The process for doing this is called managed migration or ‘Move to UC’. Following a pilot or test phase of the managed exercise which was due to be completed by November 2020 but was suspended due to the coronavirus pandemic, the most recent planning suggests by September 2024, tax credit claimants will be moved to UC, although this may change again due to the coronavirus pandemic.
In the meantime, tax credit claimants will only move to UC if they choose to do so, need to claim another benefit which UC has replaced (such as housing benefit) or have a change in circumstances that ends their tax credit award and they need to make a fresh claim for support.
If you already claim child tax credit and you start work and qualify for WTC, you can add WTC to your existing tax credits claim. Similarly, if you already claim WTC and start to be responsible for a child or qualifying young person, you can add CTC to your existing tax credits claim.
WTC is for people who work – either on employed or self-employed basis, whether or not you are responsible for any children. CTC is paid to people who are responsible for children, whether you are in work or not. An additional element may be payable in respect of disabled or severely disabled children.
This guidance is aimed at working disabled people, so in this section, we will concentrate on the provision made through WTC as there are special rules in WTC for those with disabilities which mean you might be entitled to more money because of your disability. You might also qualify for working tax credit by working fewer hours than those who have no disability.
It is important to understand that you may have a disability but that may not qualify you as disabled for tax credit purposes.
We look at the following:
- Can you tell me more about working tax credit?
- What is the disability element?
- What is the severe disability element?
- How can I claim the disability related elements?
- Self-employment and tax credits
- How might universal credit help?
You can find more detailed information on tax credits and disability on RevenueBenefits.
Can you tell me more about working tax credit?
Working tax credit (WTC) is made up of different elements. When HM Revenue & Customs (HMRC) work out how much to pay you, they first have to work out the maximum you can get. This maximum is found by adding together all of the elements you qualify for.
There are two elements that are important for those with disabilities:
What is the disability element?
To qualify for the disability element of working tax credit you must meet three conditions including a qualifying benefit test. One way of meeting the qualifying benefit condition is through receipt of benefits such as PIP (either component/rate). However, there are other ways to meet this condition as we explain in our news article.
The disability element is significant. If you qualify for the disability element and do not have children, you can get WTC by working at least 16 hours per week (rather than 30). If you are part of a couple and have responsibility for a child or children, it means you can get WTC by working at least 16 hours rather than 24 hours as required for most couples with children since April 2012. It may also mean you get more money each week from WTC.
It is important to note that it is the person working who must qualify for the disability element. If the claimant is working (and has no disability) and their non-working partner is disabled there can be no disability element included (however the non-working partner may qualify for the severe disability element – see below).
More information on the disability element can be found in our tax credits section.
What is the severe disability element?
If you are severely disabled, you might get one of the following:
- Highest rate care component of disability living allowance (DLA)
- Higher rate of attendance allowance
- Enhanced daily living component of personal independence payment (PIP)
- Armed forces independence payment
If so, you may qualify for a further amount of WTC because of your severe disability. This is called the 'severe disability element'. You will not be able to get the severe disability element unless you (or your partner) qualify for WTC. This means that you or your partner will need to be working a certain number of hours. However, unlike the disability element, there is no requirement that it must be the severely disabled person who is working. This means that in the case of a joint claim, the person with the severe disability does not have to be working.
More information on the severe disability element can be found in our tax credits section.
How can I claim the disability related elements?
You should tell HMRC when you start to meet the rules to qualify for any of the disability related elements.
If you have been waiting some time before your qualifying disability element is awarded, you can sometimes have the tax credit disability element backdated to the start of that qualifying disability element but you must notify HMRC within a month of your benefit decision.
More information on the claiming the disability elements, including on backdating an award, can be found in our tax credits section.
You need to notify HMRC when you stop getting a qualifying benefit, and although DWP also tell HMRC when a qualifying benefit has stopped, you should still report the change to HMRC.
HMRC have worked with DWP to improve this process by sharing certain information about benefits. Where information from DWP suggests a qualifying benefit has stopped, HMRC write to tax credit claimants to check whether or not they continue to meet the qualifying benefit test.
Self-employment and tax credits
For claims prior to April 2015, there was no restriction on claiming WTC for people who were self-employed, providing the work was done for payment, or in expectation of payment, and they met the remunerative work conditions. Since April 2015, the test for self-employment has been strengthened so that in order to qualify for WTC a self-employed claimant will need to be carrying on their self-employed activity on a commercial basis with a view to realising a profit. It also needs to be organised and regular.
The test applies to all self-employed tax credit claimants, but HMRC will generally consider the test and ask for evidence that you meet it, if your profit is below the number of hours you say you work multiplied by the appropriate national minimum/living wage. You can find some general information about this change on RevenueBenefits.
How might universal credit help?
Universal Credit (UC) is replacing several other working-age benefits. It is available to people whether they are in or out of work and there is no minimum hours of work requirement to qualify for UC, although you will need to agree whether you need to undertake any work or work-related activity and how much.
It is possible to get extra elements in a UC award if you have a disability or health condition and meet certain conditions. You should be aware that if you already claim any of the legacy benefits that UC is replacing, they will be stopped when you make a claim for UC and it is always a good idea to seek advice to check your best options before you change the support that you claim.
There is a useful general factsheet on UC available from Disability Rights UK.
In addition, the DWP have produced a guide on the support that is available for UC claimants who have a disability or health condition on GOV.UK.
Useful links on employment support
The government is keen to encourage disabled people in finding employment and to support them in their workplace and there is some helpful information on GOV.UK on things like looking for work if you are disabled, disability rights, and specialist employability support, which can help disabled people who find it hard to get and keep a job.
People in Northern Ireland can also find employment support information on NI direct.
Please note, the Work and Health Programme has taken the place of Work Choice, which is now closed to new applicants. The Work and Health Programme is a welfare-to-work programme which can provide specialised support to those with health conditions or disabilities. The Programme will be run by service providers awarded contracts by the government.
The Programme forms part of a wider package of employment support for people with disabilities, as outlined in the government’s Work, Health and Disability Green Paper: Improving Lives, published in October 2016.
You may be interested to read LITRG’s submission on to the government’s Green Paper.
In our submission we highlight what we see as some current barriers to work in areas within our remit, such as income tax, VAT, NIC, and tax credits. We make recommendations on where we think rules and practice could be changed to improve incentives, reduce burdens and thus contribute to the government’s overall objective of halving the employment disability gap.
We also look at the delivery of HMRC services for disabled people in our submission and raise some concerns about how HMRC assess and monitor their compliance with equality law.
Following the Green Paper, in November 2017, the government launched their 10-year strategy to help disabled people and people with health conditions, to get into work, and then remain and progress in their roles. Measures include widening ‘fit note’ certification, providing dedicated training for work coaches to support people with mental health conditions and reforming Statutory Sick Pay (SSP).
Our 2019 submission to the government’s ‘Health is everyone’s business: proposals to reduce ill health-related job loss’ consultation (looking at SSP amongst other things), can be found here.
In terms of other sources of support and guidance, Disability Rights UK have lots of help on employment for disabled people, including a section of useful links and a series of work related factsheets. The NHS also has some useful information on work and disability.