Glossary · UK
What is Means-Tested Benefit?
A benefit whose amount, or entitlement to it at all, depends on the claimant's income, savings and capital, rather than being paid to everyone who meets non-financial eligibility rules.
Full Definition
A means-tested benefit is a benefit whose amount, or whether it is paid at all, depends on the claimant's (and, where relevant, their partner's) income, savings and capital being assessed against set limits, rather than being paid to anyone who meets purely non-financial eligibility criteria such as age, disability, or having a certain number of qualifying years. Universal Credit is the main means-tested benefit for working-age households in Great Britain, with entitlement reduced as earned income rises (via the Universal Credit taper rate) and capital above certain thresholds counted against the claim, and Pension Credit works similarly for pensioners below a set income level; other examples include Council Tax Reduction and free school meals eligibility, both of which depend on household income being below a local or national threshold. This contrasts with non-means-tested benefits such as the State Pension, which is paid based on National Insurance contribution records regardless of other income or savings, Child Benefit, which (aside from the separate High Income Child Benefit Charge clawback through the tax system) is not itself means-tested at the point of claiming, and Personal Independence Payment, which is based on the practical effects of a disability or health condition rather than financial means. Understanding whether a specific benefit is means-tested matters considerably for financial planning, since it affects, for example, whether receiving an inheritance, building up savings, or a partner moving in and combining household income could reduce or end entitlement to a means-tested benefit already being claimed, in a way that would not affect a non-means-tested benefit such as the State Pension or Personal Independence Payment.