Value of property and its effect on means-tested benefits

Your entitlement to means-tested benefits may be affected if you have more than a certain amount of ‘capital’. See the box below for what counts as capital.

The benefits this applies to are:

• universal credit (UC);
• income support (IS);
• income-based jobseeker’s allowance (JSA);
• income-related employment allowance (ESA);
• housing benefit (HB); and
• pension credit.

The rules on capital vary according to whether you are under pension age (ie, you are working age), or you have reached at least pension age. You can check your pension age on gov.uk. (Note: if you are a member of a couple, differences may apply which are not covered here.)
In some circumstances, the value of your capital can be disregarded - either indefinitely or for a specific period - when assessing your benefit entitlement.

If you are of working age

For UC, IS, income-based JSA, income-related ESA, and HB, there are two capital limits which can affect your entitlement:

1. The upper capital limit of £16,000
2. The lower capital limit of £6,000

If you have capital of more than the upper capital limit of £16,000, you will not be entitled to any of these benefits.

If the amount of your capital is between the lower and upper capital limits, it is assumed that any capital you have over £6,000 provides you with some income, known as ‘tariff income’. Your tariff income is taken to be £1 a week (or, for UC, £4.35 a month) for every £250 or part of £250 you have over £6,000. Your benefit entitlement will be reduced by this tariff income, sometimes to the extent that it reduces your entitlement to nil.

If you have less than £6,000 capital, any capital you have does not affect your benefit entitlement.

See below for details of when capital can be disregarded.

If you are of at least pension age

Housing benefit

Unless you also get the guarantee credit of pension credit (see below), there is an upper and lower capital limit for pension-age HB.

1. The upper capital limit is £16,000
2. The lower capital limit is £10,000

If you have capital of more than the upper capital limit of £16,000 you are not entitled to housing benefit.

If the amount of your capital is between the lower capital and upper capital limits, it is assumed that your capital over £10,000 will provide you with some income, known as ‘deemed income’. Your deemed income is taken to be £1 a week for every £500, or part of £500, you have over £10,000. Your HB entitlement will be reduced by this deemed income, sometimes to the extent that it reduces your entitlement to nil.

If you get the guarantee credit of pension credit, any capital you have is ignored when calculating your HB. If you do not get the guarantee credit of pension credit, in some circumstances your capital can be disregarded. See below for further details.

Pension credit

There is no upper capital limit for pension credit.

If you have capital of over £10,000, you are assumed to have ‘deemed income’ of £1 a week for every £500 or part of £500 you have over £10,000. Your pension credit entitlement will be reduced by this deemed income, sometimes to the extent that it reduces your entitlement to nil.

See below for details of when your capital can be disregarded.

The value of property

If you own or part-own a property, the value of your share of the property counts as your capital, unless it can be disregarded.

The value of a property is its current market value, which could be very low if it is difficult to sell, minus any outstanding mortgage or other debts secured against the property. Generally, 10% is also deducted from the value of the property for the cost of sale.

In England and Wales, if you jointly own your property with someone under a ‘joint tenancy’ you are considered to own an equal share with the other owner(s). If you own the property as ‘tenants in common’, you may each have different shares. In Scotland, if you jointly own property with someone, you could have equal shares or different-sized shares, and you may need to provide evidence to establish the amount of your share.

Capital that can be disregarded

In some situations, certain kinds of capital can be disregarded. This means they do not count towards the capital limits for means-tested benefits and are not included when calculating your tariff income or deemed income. For full details of the circumstances in which capital can be disregarded see the following information in our Welfare Benefits and Tax Credits Handbook (for subscribers):

• ‘Disregarded capital’ for UC
• ‘Disregarded capital’ for other means-tested benefits: under pension age
• ‘Disregarded capital’ for other means-tested benefits: over pension age

When the value of property can be disregarded

There are some circumstances when the value of your property can be disregarded. These include, for example:

• the home you live in – if you own the home you usually live in, its value is ignored. This includes if you are temporarily absent from the property, for example due to fleeing domestic abuse, but you are intending to return;
• your former home, if you have left it following relationship breakdown – the value of your property is ignored for 26 weeks (or 6 months, for UC) from the date you left the property, if you left it following the breakdown of your relationship. If your former partner still lives there and is a lone parent, the value of the property can be disregarded indefinitely;
• you are taking reasonable steps to dispose of the property – if you are taking reasonable steps to dispose of the property, its value is ignored for 26 weeks (or 6 months, for UC) from the date when you first took such steps. This could include listing the property with an estate agent, seeking legal advice to sell your share of the property to the other owner(s), or commencing proceedings to resolve financial issues on divorce or the dissolution of your civil partnership if your spouse or civil partner doesn’t agree to the sale. The disregard can continue for longer than 26 weeks/6 months if it is reasonable in the circumstances;
• you have sought legal advice or have started legal proceedings in order to occupy the property as your home – its value is disregarded for 26 weeks (or 6 months, for UC) from the date you first took such steps. For example, if you have left your home due to domestic abuse but have now applied for an occupation order (in England and Wales) or an exclusion order (in Scotland) to remove your ex-partner and allow you to move back in. This 26-week/6-month period can be extended if it is reasonable in the circumstances;
• if you sell your home or former home and intend to use the money from the sale to buy another home – the money you get from the sale is disregarded for 26 weeks (or 6 months, for UC) from the date of sale or, for UC, from the date you receive the money. You do not need to have decided to buy a particular property, but you need to have an intention, which is more than a ‘hope’ or ‘aspiration’. If you need longer to complete a purchase, your capital can continue to be disregarded as long as this is reasonable in the circumstances. For pension-age HB and pension credit, money you have which you intend to use to buy a property to live in can be ignored for a year from the date you receive it;
• if the property is occupied by your relative who is over pension age, or who has limited capability for work or, for IS, income-based JSA, income-related ESA, HB, and pension credit is ‘incapacitated’ – in this case the value of the property can be disregarded indefinitely if your relative continues to occupy the property and meet the criteria. ‘Incapacitated’ is not defined but guidance suggests that it includes anyone who receives or would be entitled to employment and support allowance, attendance allowance, disability living allowance or statutory sick pay. It may also include those entitled to personal independence payment, adult disability payment or child disability payment, although it may be arguable that a broader interpretation should apply; and
• other circumstances when the value of a property can be disregarded – the value of a property can also be ignored if you have acquired the property but have not yet moved in and intend to live in it within 26 weeks (or 6 months, for UC) of acquiring it, or if essential repairs or alterations are being carried out to make the property fit for you to occupy as your home, for 26 weeks (or 6 months for UC) from when you first took steps to carry them out. In both cases the disregard can continue for longer if it is reasonable in the circumstances.

In some situations, money you have received because your home is damaged or for essential repairs or improvements, or a grant that has been made to you to allow you to buy a home or do repairs or alterations to make it fit for you to live in, can also be ignored for 26 weeks (6 months for UC) or for longer if it is reasonable in the circumstances. For further details, see the following information in our Welfare Benefits and Tax Credits Handbook (for subscribers):

• ‘When the value of the property is disregarded’ for UC
• ‘When the value of the property is disregarded’ for other means-tested benefits: under pension age
• ‘When the value of the property is disregarded’ for other means-tested benefits: over pension age.

Claiming universal credit, housing benefit or pension credit when you own property

When you claim a means-tested benefit you are asked to provide details of your capital, including the type of capital you have and its value. If you own a property that you don’t live in, your claim for UC or HB will be refused if the value of your share of the property is over £16,000, unless its value can be disregarded. If you claim pension credit, the value of your share of the property may mean that the amount of your pension credit is greatly reduced or that you do not qualify for pension credit at all, unless the value of the property can be disregarded.

If you think the value of your property should be disregarded, it is therefore important to explain this to the Department for Work and Pensions (DWP) or, for HB, your local authority.

For example:

• if you have started to take steps to sell your property, tell them what steps have been taken and provide evidence to show this. If, after 26 weeks (or 6 months, for UC), your property is still not sold, then update the office paying your benefit (the DWP or local authority) and explain what is being done to progress a sale;
• if your spouse or civil partner is refusing to let you sell the property and the only way to force a sale is to get divorced or dissolve your civil partnership, provide evidence that you have started proceedings for divorce or the dissolution of your civil partnership and explain why this is necessary to dispose of the property;
• if you have applied for an occupation order or exclusion order to seek to occupy your property, if possible, supply a copy of your application or evidence of the legal advice you have received.

If you are claiming UC, you can use our tool for survivors of domestic abuse Can the value of a property be disregarded? to create a note for your UC journal on your online account, or to include in a letter, to explain why the value of the property should be disregarded.

Challenging decisions

If the value of your property is not disregarded when it should be, and this means you are refused benefit or the amount of your benefit is reduced, request a mandatory reconsideration of the decision and if unsuccessful, appeal (or, for HB, either request a revision of the decision and appeal if this is unsuccessful, or appeal without requesting a revision). There are time limits for challenging decisions in this way. For further information see ‘Getting a decision changed‘ in our Welfare Benefits and Tax Credits Handbook (for subscribers).

Further help on benefits and tax credits

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CPAG’s publications

Welfare Benefits and Tax Credits Handbook, a comprehensive guide to benefits and tax credits for claimants and advisers which is available in print or online.

CPAG’s Early Warning System

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