What is the Universal Credit capital taper rule and savings limit?

Full answer

Universal Credit Capital Taper Rule -- Full Explanation Universal Credit (UC) takes savings, investments and certain other capital assets into account when assessing entitlement. The rules work as follows. The three capital thresholds 1. Below GBP 6,000 -- capital is ignored entirely; no effect on UC award. 2. GBP 6,001 to GBP 16,000 -- capital in this band creates a 'tariff income'. For every GBP 250 (or part of GBP 250) above GBP 6,000, HMRC assumes you have GBP 4.35 per month of notional income. This reduces your UC award by that amount, regardless of whether the capital is actually generating any income. 3. Above GBP 16,000 -- you are not eligible for Universal Credit at all (with very limited exceptions). Practical example Savings of GBP 8,000: - Excess above GBP 6,000 = GBP 2,000 - GBP 2,000 / GBP 250 = 8 units - Tariff income = 8 x GBP 4.35 = GBP 34.80/month reduction in UC Savings of GBP 15,750: - Excess = GBP 9,750 - GBP 9,750 / GBP 250 = 39 units - Tariff income = 39 x GBP 4.35 = GBP 169.65/month reduction What counts as capital - Bank and building society accounts (current and savings) - Cash ISAs (but Lifetime ISA counts with some rules around the bonus) - Shares and stocks - Property you own but do not live in (rental properties) - Cryptocurrency holdings - Valuable personal possessions above GBP 6,000 in value What does NOT count as capital - The home you live in (your main dwelling) - Personal possessions (cars, furniture, clothing) below GBP 6,000 - Money you hold in trust for someone else - Arrears of certain benefits (disregarded for 12 months) - Personal Injury Compensation (disregarded for 12 months, sometimes indefinitely) Capital in pension funds Capital held inside a registered pension scheme is generally ignored for UC purposes until you reach pension age (currently 66). Once you reach pension age, pension wealth can be taken into account. Joint claims For couples making a joint UC claim, the GBP 6,000 and GBP 16,000 thresholds apply to combined household capital, not individually. Key planning consideration If your capital is just above GBP 16,000 -- for example, due to a redundancy payment, inheritance or house sale proceeds -- you will not qualify for UC until capital falls below that level. Spending capital on legitimate household needs (home improvements, paying off debts) is permissible, but deliberate 'deprivation of capital' to qualify for benefits can be challenged by the DWP.