Care Leaver Payment - Scotland

The Scottish Government published a consultation in November 2023 to gather views on the proposed Care Leaver Payment. Our response focuses on tax and benefit considerations.

We do not advocate a particular policy approach. However, we take into account the stated intention for the payment and the fact that the Scottish Government views care leavers as potentially disadvantaged. On that basis we think consideration should be given as to whether the Care Leaver Payment should be exempt from income tax and disregarded in the calculation of benefits payments.

If the payment is to be treated as taxable income, we set out key considerations, such as the need to consider the categorisation of the payment under legislation and the practicalities of collecting tax on the payment. We consider the position for recipients if tax is deducted at source: there would need to be clear guidance and support to help care leavers reclaim any overpaid tax. We stress the importance of the Scottish Government and HMRC working closely to ensure good operational processes, as well as communications.

For benefits purposes, we look at the implications of the payment being taken into account when calculating entitlements. We note that the Scottish Government must work closely with the DWP to ensure any legislative amendments are made, such that the payment fulfils the policy intent.