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Calculating Means-Tested Benefits and Tax Credits

All means-tested benefits and tax credits are calculated by reference to a comparison between set minimum levels and income. Some are also subject to capital limits. The minimum levels are known by different names, depending on the benefit or tax credit. There are special rules for the treatment of income, with some types of income being partly disregarded (e.g. earnings for Jobseekers Allowance (income-based)) or fully disregarded (e.g. Disability Living Allowance and Attendance Allowance for all means-tested benefits and tax credits).

For Income Support (IS), Jobseekers Allowance (income-based) (JSA(IB)), Employment and Support Allowance (income related) (ESA(IR)) and Guarantee Credit (GC), benefit is only payable if the income is less than the minimum level. The amount payable is the amount of the difference.

Housing Benefit (HB) and Council Tax Benefit (CTB) are calculated by reference both to the maximum rent and the maximum Council Tax and to the minimum level and income. If the income is less than minimum level e.g. where a person receives IS, JSA(IB) or GC, the maximum amounts are payable. If the income exceeds the minimum level, the maximum amounts are reduced by 65% (HB) and 20% (CTB) of the excess.

Working Tax Credit (WTC) and Child Tax Credit (CTC) are calculated by reference to maximum credits and income. If the income is less than a certain threshold, maximum credits are payable. If it is above the threshold, these are reduced, in most cases, by 39% of the excess.