Income Tax (Earnings and Pensions) Act 2003 section 672

Taxable maximum: general

Section 672 explains how to calculate the "taxable maximum" — the cap on the amount of jobseeker's allowance that is subject to income tax in any given week or part of a week.

• The taxable maximum for a full week depends on whether the claimant receives an income-based or contribution-based jobseeker's allowance, with each type calculated under different rules (section 673 or section 674 respectively).
• Where the allowance is paid for only part of a week, the taxable maximum is scaled down proportionally based on the number of days actually covered.
• The part-week calculation uses the formula (N / 7) × TMW, where N is the number of days for which the allowance is actually paid and TMW is the taxable maximum that would apply if the allowance had been paid for the full week.
• This taxable maximum figure feeds into the broader calculation in section 671, which determines the taxable portion of a jobseeker's allowance payment.