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Universal Credit (UC) is gradually replacing tax credits, and some other social security benefits. Universal credit is now available across the UK and HMRC state that it is no longer possible for anyone to make a brand-new claim for tax credits. The only exception is for certain people who are granted refugee status. Instead, people are expected to claim UC or pension credit depending on their circumstances.  Currently, existing tax credit claimants can continue to renew their tax credits and/or add extra elements to their claim. See our existing tax credit claimants page for more information. Our understanding is that the majority of existing tax credit claimants will move to either universal credit or pension credit by the end of the 2024/25 tax year. You can find out more about this in our universal credit section. 

Updated on 6 April 2024

Capital and universal credit

The amount of capital you have can affect whether or not you qualify for universal credit and the may affect the amount of your universal credit award. 

A chalkboard with the title 'ASSET ALLOCATION' underneath this is a pie chart and key with the categories of 'STOCK, BONDS, REAL ESTATE, and Cash'.
bleakstar /

How capital affects a universal credit award

To qualify for universal credit, you must meet the financial conditions. One of the financial conditions is that you must not have capital over £16,000. If you are making a joint universal credit claim, you cannot have combined capital of over £16,000.

If you move to universal credit from another benefit because you have received a migration notice, you may still qualify for universal credit for a period of time even if you have capital above £16,000. See our moving to universal credit section for more information.

If you have capital of £6,000 or less (combined capital in a joint claim) it is ignored and does not affect your universal credit award.

If you have more than £6,000 of capital then it will be treated as if it is giving you an income in each monthly assessment period. This monthly income is sometimes called a ‘tariff income’.

You will be treated as having £4.35 of income in your assessment period for every £250 (or part of £250) over the £6,000 threshold. This monthly income will be unearned income – which means it will reduce your universal credit maximum amount £1 for £1.

Where your capital is treated as if it is giving you an income, then any actual income that also comes from that capital, for example rent receipts, interest or dividends, is treated as part of your capital from the day those payments are due to be paid to you. You are not treated as having income from capital if that capital is disregarded or the actual income from your capital is already taken into account as unearned income, for example income from an annuity or income from a trust.

Example - Dennis

Dennis is a single claimant with savings of £6250. He will be treated as having unearned income of £4.35 in each assessment period that he has £6250 of capital. This is because he has £250 of capital over the £6,000 limit. 

Example - Sandra

Sandra is a single claimant with savings of £6250.61. She will be treated as having unearned income of £8.70 in each assessment period that she has £6250.61 of capital. This is because she has £250.61 of capital over the £6,000 limit.

Definition of capital

Capital includes things such as savings, shares, property and other assets. There are some exceptions which means that some capital is disregarded and there are special rules about how the value of some types of capital is worked out.

In general terms, capital includes things like cash savings (including money in the bank as well savings schemes such as ISAs), shares, property that is not the claimant’s main residence and other things but it does not include personal possessions or a claimant’s main residence. There can sometimes be confusion about whether something is income or capital for universal credit purposes – if you are unsure you should check with DWP.

There are also rules about spending capital. Claimant’s are free to spend their own capital but if they have had capital over the £6,000 limit (or over the £16,000 limit) and spend some or all of it on something that DWP consider non-essential or non-routine, DWP may check whether they think the claimant has deliberately deprived themselves of capital in order to claim universal credit (or claim more universal credit). Anyone concerned about this should speak to their universal credit work coach or a specialist welfare rights adviser.

There are specific rules about business assets for people claiming universal credit who are self-employed or treated as self-employed. There is more information in our self-employment and universal credit section.

Detailed information about what counts as capital and what is disregarded as capital can be found in the DWP staff guide Chapter H1 Capital and Chapter H2 Capital disregards.

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