Tax benefits for older people
Do my ageing parents still have to pay tax? What benefits and schemes are there to help them?
When you’re helping relatives and friends to manage their finances as they get older, there are several questions you may want to clear up regarding their finances. Tax professionals Tax Rebate Services offer the following pointers.
Attendance Allowance (AA)
The first and perhaps most important benefit of all is Attendance Allowance. Many ill or disabled people over the age of 65 are missing out on the chance to claim Attendance Allowance, worth up to £82.00 per week in severe cases (September 2016), because of misconceptions about what exactly is involved.
Attendance Allowance is a tax-free benefit paid to people over the age of 65 who need the help to look after themselves because of a physical or mental disability. Don’t be put off applying because your parent does not have a carer or you, yourself, do not look after them full-time. The allowance is based on the help they need, not the help they already receive.
Currently claimed by 1.8million and costing around £5.4bn per year, Attendance Allowance has the highest take up with elderly people on lower incomes. Your parent will qualify if they have a mental disability (including learning difficulties), a physical disability (including sensory disability such as blindness) or both or if their disability is severe enough to mean they need help with the following:
- Assistance with activities such as getting dressed, eating, using the toilet or getting in and out of the shower. These are basic rights to which we are all entitled, and that includes your parents.
- Supervision to avoid putting themselves or others around them in danger, for example, taking the correct medication as prescribed by their doctor or maintaining a controlled diet plan.
You can get a claims form by calling the benefit enquiry line on 0800 88 22 00 or downloading a claims form online. You will need to state on the form how the disability affects your elderly parent, so it’s a good idea to have a conversation with them first to explain what exactly the allowance is and how it can improve the quality of their everyday life.
Blind Person’s Allowance (BPA)
If your parent is blind and therefore struggles to complete the everyday tasks we take for granted, the chances are they are entitled to Blind Person’s Allowance (BPA). This reduces the amount of taxable income on which they have to pay tax.
If they are eligible for BPA, they are entitled to this in addition to their personal allowance and age-related personal allowance. The BPA for 2016-17 is £2,290 but to be in with a chance of securing this support you must tell HMRC to claim it.
Married Couple’s Allowance (MCA)
Is your parent married or in a civil partnership? Have they been together for some years now? If so, they may be entitled to claim Married Couple’s Allowance (MCA). This benefit can only be claimed if one was born before 6 April 1935 and married or in a civil partnership - not just living together.
Unlike Personal Allowance and Blind Person's Allowance, MCA does not increase the tax-free allowance, but is deducted from your parent’s tax bill. In basic terms, it’s worth 10 percent of its face value, i.e. their bill will be reduced by 10 percent of the amount of the MCA.
Of course, there are other ways in which married couples can try to make their financial arrangements more tax efficient, for example, by putting all savings into one person’s name to take advantage of any unused tax-free capacity.
Should my parent still be paying tax?
The final question really depends on your parents’ circumstances. Everyone has a personal tax-free allowance (unless their income exceeds £100,000, when they begin to lose the allowance at a rate of £1 for every £2 in excess). If their total taxable income is greater than their personal allowance then they’ll have to pay some tax. However, if not, then they are considered a non-taxpayer.
This article was created in September 2016.
Tax Rebate Services offer advice about tax entitlement for older people and for those becoming carers. They can be contacted on 0845 094 0005 for help and advice.
If you found this article helpful you may like to read:
- A practical guide to applying for Attendance Allowance
- Tips on helping the less mobile to manage money safely
- A quick guide to the Senior Citizens and Disabled Persons Railcards