Universal credit: Capital rules
The capital rules for Universal Credit follow those for most current means-tested benefits by allocating an income to the claimant based on the amount of capital held. Presently, capital itself is not taken into account for tax credits, only any actual interest (generally above £300) is calculated as income.
Savings (or ‘capital’) over a certain amount will be included when working out how much, if any Universal Credit is payable.
Universal Credit adopts the general capital rules that are established in other means-tested social security benefits. The maximum capital limit for claiming Universal Credit is £16,000 for either a single person or a couple where that capital is held jointly. If capital is above this amount there is no entitlement to UC.
Capital or joint capital over £6,000 is treated as providing income, known as “tariff income”, of £4.35 per month for each additional £250 (or part thereof). For example capital of £6,250 gives monthly tariff income of £4.35. Capital of £6,250.01 gives a monthly tariff income of £8.70.
The lower limit is £6000, so any capital below £6000 is disregarded.
The upper limit is £16000, so anyone with savings (capital) over £16,000 cannot get Universal Credit.
Many current tax credit claimants will be unfamiliar with this rule and the amount of their savings could lift them out of entitlement to Universal Credit. This is because tax credits do not take into account capital in the same way as means tested benefits. Instead of using a tariff income, tax credits only take into account actual interest received from capital (generally only if it is above £300).
In one of their early briefing notes, DWP gave assurances that tax credits claimants with savings above £16,000 would be given transitional protection to protect their cash income. Transitional protection only applies to people who are ‘managed migrated’ (moved by HMRC or DWP to UC) and not to anyone who has a change of circumstances that triggers the ending of their tax credits and a need to claim UC. You can find out more about this in our transitional protection section.
Not all capital is taken into account, some may be disregarded and sometimes claimants may be treated as having capital even if they do not physically have it (notional capital). Advisers can find the detailed rules about capital in the DWP ADM Chapters H1 (Capital) and H2 (Capital disregards).
Updated 7 March 2016