Capital and universal credit

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 fall under an exception which means you have made a single claim, but are part of a couple, your partner’s capital will be treated as yours. See our making a claim page for more information.

If you moved to universal credit from tax credits because you 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 transitional protection page 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 is often called tariff income. 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.

To calculate your tariff income:

1. Work out your total capital (if you are part of a joint claim, this is the total of you and your partner)
2. Deduct £6000 from your total capital
3. Divide the remaining amount by £250 and round up the amount to the nearest whole number
4. Multiply the result by £4.35

The following examples show how this calculation works:

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. Money and savings that belong to your children and which are in their name, such as Junior ISAs, do not count as your capital. Savings for children that are in your name are treated as part of your capital. 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.

If you get some income during an assessment period but don’t spend it all by the end of that assessment period, only the amount of that income that remains unspent by the end of the following assessment period counts as part of your capital. As mentioned earlier, some types of capital are disregarded.

There are also rules about spending capital. You are free to spend your own capital but if you 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 you have deliberately deprived yourself of capital in order to claim universal credit (or claim more universal credit). If you are concerned about this you should speak to your universal credit work coach or a specialist welfare rights adviser.

Income you receive from letting out property is not counted as income for universal credit purposes but the rules say that where the property is counted as your capital (in other words it is not disregarded capital), any actual income from that capital, such as rent received, is treated as part of your capital from the day it is due to be paid to you. There are rules about how the value of capital is worked out, which include deductions for things like the costs of sale. If DWP decide your property letting amounts to carrying on a trade, they may treat the property as a business asset although if you are running a property business as a limited company, then special rules may apply and there is more information in our Limited Companies section.

There are specific rules about business assets for people claiming universal credit who are self-employed or treated as self-employed and DWP have confirmed that money put aside for the purpose of paying a tax bill for a business will be disregarded if it is in a business bank account or you can provide evidence to show why you put it aside. 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.