Only certain specified types of income, other than earnings, are taken into account for universal credit (UC). These are listed and explained in more detail below. This kind of income reduces your UC pound for pound. Any other income is ignored.
BENEFITS THAT ARE TAKEN INTO ACCOUNT
The following benefits count in full:
- carer’s allowance (CA) – but not CA supplement in Scotland;
- employment and support allowance (ESA);
- industrial injuries benefit, except constant attendance allowance and exceptionally severe disablement allowance, which are disregarded;
- jobseeker’s allowance (JSA);
- maternity allowance;
- retirement pensions;
- severe disablement allowance;
- widow’s pension and widowed parent’s allowance;
- foreign social security benefits and state retirement pensions that are similar to those listed above;
- an overpayment of income support (IS), income-based JSA (not joint-claim JSA), income-related ESA or housing benefit if you are not entitled to that benefit and the overpayment falls within a UC assessment period.
Statutory sick pay, statutory maternity pay, statutory adoption pay, statutory paternity pay, statutory shared parental pay and statutory parental bereavement pay are treated as earnings and so may benefit from the work allowance.
BENEFITS THAT ARE NOT TAKEN INTO ACCOUNT
All other benefits are ignored – e.g.:
- adult disability payment (in Scotland);
- armed forces independence payment;
- attendance allowance;
- bereavement support payment;
- Best Start grant (in Scotland);
- CA supplement (in Scotland);
- child benefit;
- child disability payment (in Scotland);
- child winter heating assistance (in Scotland);
- disability living allowance;
- funeral support payment (in Scotland);
- guaranteed income payment and surviving guaranteed income payment under the Armed Forces Compensation Scheme;
- guardian’s allowance;
- industrial injuries constant attendance allowance and exceptionally severe disablement allowance;
- personal independence payment;
- Scottish child payment;
- social fund payments;
- two-week run-on of IS, income-based JSA and income-related ESA;
- war disablement pension;
- war widow’s, widower’s or surviving civil partner’s pensions;
- young carer grant (in Scotland).
Maintenance for a child is ignored completely.
Any maintenance for you or your partner made by your or your partner’s spouse/civil partner or former spouse/civil partner under a court order or under a maintenance agreement counts in full as income.
If a former partner makes payments direct to a third party (e.g., your mortgage lender), this should not count as your income. However, if there is income available to you which you choose not to access, you may be treated as having it under the ‘notional income’ rules.
If you pay maintenance to a former partner or a child not living with you, your payments are not disregarded when working out your income for UC.
STUDENT LOANS AND GRANTS
For the special rules on the treatment of student loans, grants and other types of student support, see here
OCCUPATIONAL AND PERSONAL PENSIONS AND ANNUITIES
The following income is taken into account:
- an occupational pension;
- income from a personal pension;
- income from a retirement annuity contract (including an annuity purchased for you or transferred to you on divorce);
- payments from a former employer for early retirement on the grounds of ill health or disability, unless this was under a court order or settlement of a claim;
- an overseas pension;
- a Civil List Act pension;
- payment under an equity release scheme. This provides regular payments from a loan secured on your home;
- payments from the Financial Assistance Scheme and periodic payments from the Pension Protection Fund (these help some people with underfunded occupational schemes whose employer has gone out of business).
Payments under a policy to insure against the risk of losing income due to illness, accident or redundancy are taken into account in full.
TRUSTS, PERSONAL INJURY PAYMENTS AND SPECIAL COMPENSATION SCHEMES
If you get an amount awarded to you because of a personal injury, it can be disregarded in certain circumstances.
- If you receive the compensation in regular payments, they are disregarded as income.
- If the compensation is in a trust, both the capital value of the trust and any income from it are ignored. For more about how payments from personal injury trusts or other trusts are treated.
- If the compensation was used to buy an annuity, payments under the annuity are ignored.
- If the compensation is administered by the court on your behalf or can only be used by direction of the court, the capital is ignored and regular payments are disregarded as income.
- If the compensation is not used in one of the above ways, it is disregarded as capital for 12 months. This gives you a chance to spend some or all of it, or to put it in a trust or buy an annuity.
Personal injury payments include compensation from the Criminal Injuries Compensation Scheme. Victims payments to people injured in a Northern Ireland ‘Troubles-related incident’ are disregarded as income or capital indefinitely.
Income from a trust that is not set up from personal injury compensation is taken into account, whether it is a discretionary trust or other type of trust.
SPECIAL COMPENSATION SCHEMES
Payments of income (or capital) are ignored from specific schemes and certain schemes approved by the government, including:
- the National Emergencies Trust;
- the Windrush Compensation Scheme;
- the Child Migrants Trust (for children subjected to migration programmes before 1971);
- schemes to make child abuse payments for historic institutional child abuse in the UK;
- for people infected from contaminated blood products;
- for people affected by the 2017 fire at Grenfell Tower.
If you have capital over £16,000, you are not entitled to UC. If your capital is below this level, it can affect the amount of income that is taken into account. This is either because you have actual income from the capital, such as income from a trust, or because it is assumed that the capital gives you a certain amount of income.
ASSUMED MONTHLY INCOME FROM CAPITAL
If your capital is over £6,000 but not more than £16,000, you are treated as having some income from it. This ‘assumed monthly income’, often called ‘tariff income’, is set at the rate of £4.35 a month for every £250, or part of £250, between £6,000.01 and £16,000. See here