Universal Credit and Social Care – How assets and income affect entitlement

Why might it be of interest?
Most benefits are affected by income, savings and assets. PIP and DLA are not means tested in any way but are two of the few that are not.

Many of our young people will claim Universal Credit (UC) at some point if not already doing so and many will also receive a social care package. It is important, for both of these benefits, to understand how any income or savings the young person has or any assets they have will affect their claims and the amount of money they receive.

Parent income is not relevant here – once a young person turns 18 parent or family income, etc doesn’t count but anything in the young person’s name will be considered as their income, savings, etc.

There are other reasons why a young person should not have significant savings or assets in their name aside from how their benefits might be affected. You might find it relevant to refer to documents about wills and trusts and planning for the future in other folders.

Universal Credit (UC)

• If you have savings over £16,000 you are not eligible for UC
• Savings under £6,000 are ignored and do not affect your benefit
• Savings between £6,000 and £16,000 affect the amount of benefit you will receive
• For every £250 (or part £250) you are deemed to receive £4.35 in income (it’s irrelevant whether you actually do)
  • So if you have £7,000 in savings:
  • £6,000 is ignored
  • £1,000 is taken into account
  • For each £250 you are deemed to have income of £4.35
  • So for £1,000 this means 4 x £4.35 which equals £17.40
  • This is the amount that will be deducted from your UC

Benefits affected by income, savings and assets

• UC
• Income related ESA
• Housing Benefit
• Council Tax

For UC purposes savings are counted as any money you can get hold of relatively easily, or financial products that can be sold on. These include:

• cash and money in bank or building society accounts, including current accounts that don’t pay interest
• National Savings & Investments savings accounts, and Premium Bonds
• stocks and shares
• property, which isn’t your main home
  • under certain circumstances, other properties you own but don’t live in might be disregarded

Other savings and capital are disregarded, including:

• personal possessions, such as jewellery, furniture or a car
• value of any pre-paid funeral plans
• life insurance policies that haven’t been cashed in
• insurance claims will be ignored for six months if used to replace or repair

Money in a pension pot will not be counted as an asset as you have no access to it until you are of pensionable age and then income from the pension pot will be counted as income for benefits purposes

Income that may be counted

When calculating your entitlement for UC and the amount you receive from various sources is taken into account and will be considered as income.

• Your take home pay from work or self employed work counts as income (less pension contributions)
• Income from benefits or pensions usually count as income

Some benefits are not counted as income but for our purposes this will only be DLA and PIP.

• A person in receipt of UC can take paid work – their UC will adjust
• Some people will have a work allowance before their UC is affected
  • For our purposes this will be young people deemed to have a Limited Capability for Work or Limited Capability for Work Related Activity
  • The rate of work allowance depends on your circumstances
    • Currently £404 if you have help with housing costs
    • £673 if you do not have help with housing costs
  • This allowance only applies to income earned through employment or self employment
  • When you go over your allowance your UC is reduced by 55p for every £1 earned
• The number of hours worked is not relevant – only your income

Limited Capability for Work

Limited Capability for Work or Work Related Activity

Many of our young people will be deemed to have a limited capability for work (LCW) or limited capability for work or work related activity (LCWRA).  To determine which group is relevant they will undergo a Work Capability Assessment.  Initially a paper assessment but may be followed up by a face to face assessment.

Limited Capability for Work

• A person in the LCW group is deemed to not be currently capable of work but may be capable of work at some time in the future with some support and preparation
• They will not receive additional UC but will have fewer conditions attached to their claim.
  • For example, they may have to attend job focussed interviews but will not be require to apply for jobs

Limited Capability for Work or Work Related Activity

• A person in the LCWRA group is deemed as not capable of work or preparing for work, ie there is no expectation that they will work at any point in the future
• You will receive an additional element called the LCWRA element
• Your work allowance will be higher

Young people in either group can work if they want to do so.  They will have a work allowance which is the amount they can earn before their benefits will be reduced.  How much the work allowance is depends on whether they have help with housing costs or not.

The current rates are:

• £404 per month if you have help with housing costs
• £673 per month if you do not have help with housing costs

This information can be found here:  https://www.gov.uk/guidance/universal-credit-and-earnings.

If you earn more than your work allowance your benefit is reduced.  For every £1 you earn over your work allowance your benefit will be reduced by 55p.  There is no limit on the number of hours you can work – in previous iterations of UC and other income replacement benefits there was a limit on the number of hours you worked as well as what you could earn.

If your young person is still receiving ESA they are able to work but the rules around the amount they can earn / number of hours they can work are different from the UC rules.

It’s important to remember that earnings can affect other benefits so while your earnings might not affect your UC it might have an effect on housing benefit, for example.  I am not going to attempt to explain how this works as it’s not quite as straightforward as the UC taper.

Social Care

These figures are changing significantly from October 2023 but these are the current rates:

• Savings or assets over £23,250 – you will fully fund your care package
• Savings or assets below £14,250 – ignored
• Savings between £14,250 and £23,250 will incur a contribution towards your package:
  • For every £250 of capital it is assumed you have £1 of income
  • This is payable towards the cost of your care package

However, depending on your income you may still need to make a contribution towards your care package.

I have a document about the minimum income guarantee which explains more about these circumstances.

Just quickly, if a young person receives enhanced rate PIP and is in the LCWRA group for UC their current (as of December 2024) weekly income is approximately £275 per week.  A person is allowed to keep a certain amount of their benefits income but the difference between this allowance and the total of their benefits is the amount that is likely to be their contribution towards their care package.

This contribution is not based on the size of the package.  So, someone receiving a few hours a week of adult social care will pay the same contribution as a person on a 24/7 package.

Again, just briefly, so please refer to our minimum income guarantee information and disability related expenses information, the government sets an annual minimum income guarantee (MIG).  This is not a single figure – it is made up of an allowance based on your age and whether you are single or in a couple; and various premiums depending on your personal circumstances.  In addition to the MIG you may have disability related expenses – these are costs you have because of your disability that you would not have if you were not disabled.  Some local authorities have an automatic amount they allow for disability related expenses – but not all.  You can make a case for further disability related expenses even when there’s an automatic allowance.  There are also some other outgoings that can be disregarded by social care.

Basically you add up your MIG (including relevant premiums); disability related expenses; other disregards to come to a total figure of benefits money you are allowed to keep before making a contribution towards your social care package.

This is an example only and the figure are approximate – I’m adding up a hypothetical individual’s personal allowances:

You must make the contribution – if you do not you will not receive your social care package.

Earnings from work are not taken into account but do keep in mind that earnings over certain thresholds will affect Universal Credit and Housing Benefit.