Losing one’s job is a difficult and emotional time in a person’s life and it’s also financially troublesome. Luckily, in the UK, a person is able to get what is called a job-seeker’s allowance (JSA) when they are looking for work or when they are considered a part of the low-income group. In this article, we cover what the JSA is and whether it is taxable or not to see if you need to pay unemployment tax.
What is the job-seeker’s allowance (JSA)?
Firstly, it’s important to note that there are currently three types of JSA available. These are the following:
- Jobseeker’s allowance – new style: This JSA is paid to people who are seeking work and who have met the National Insurance contribution requirements.
- Jobseeker’s allowance – contribution-based: Such a JSA is paid to people who are seeking work and who have met the National Insurance contribution requirements. In many cases, this has been replaced by the new-style JSA.
- Jobseekers allowance – income-based: in this last category, this JSA is paid to people who are seeking work and who have a low income.
Is JSA taxable?
Those that are considered HMRC unemployed and who are looking for work while receiving one of the three types of JSA should be aware that in all three cases above – JSA is taxable. However, there are differences in terms of whether it is counted as income for universal credit.
For example, with JSA – new style, it’s important to remember that it is counted as income for tax credit purposes and that it is counted in full as unearned income for universal credit.
Regarding contribution-based JSA, it is counted as income for tax credit purposes and is also counted in full as unearned income for universal credit.
Finally, when it comes to income-based JSA, the case is a bit different. And income-based JSA is an exception. Although it is taxable, it is not counted as income for tax credits. That’s why those who receive income-based JSA will generally be entitled to maximum tax credits. As for whether income-based JSA is income for universal credit, it is also important to note that it is being replaced by universal credit and will form part of the universal credit award. According to the Gov.uk website, “any excess paid for the same period as a universal credit award, after adjustment for overlapping benefits, is taken into account as unearned income for universal credit.”
Closing remarks
Whether you are trying to figure out what the HMRC self-employed tax is or you need to help an employee navigate the world of job-seekers allowance benefits, you will always benefit from a helping hand to ensure that you get the right advice and maximise your benefits at the right time. With your outsourced bookkeepers at Tax Navigator, you’re in good and capable hands because our specialists can help you better understand the world of JSA as well as self-employed tax, in addition to other hundreds of details with regard to tax to ensure you are more informed and make better decisions.
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