Will a disrepair payout affect my Universal Credit or benefits?

Direct Answer

For many tenants, a housing disrepair payout does not affect your Universal Credit at all. Universal Credit ignores the first £6,000 of savings, so if your total savings stay under £6,000, your payments do not change. A bigger payout, or one that takes your total savings over £6,000, can reduce your Universal Credit, and over £16,000 it can stop until your savings drop again. Any part of the payout that is compensation for a health problem the bad housing caused is ignored for the first 12 months. Do not let worry about your benefits stop you from claiming. There are simple ways to plan it, and you should always tell the DWP about a payout.

How savings affect Universal Credit

Universal Credit looks at your savings, which it calls "capital":

• Under £6,000: ignored. Your Universal Credit does not change.
• Between £6,000 and £16,000: your payment is reduced by £4.35 a month for every £250 you have above £6,000.
• Over £16,000: you are not entitled to Universal Credit until your savings drop below that figure.

These are the gov.uk rules for Universal Credit money, savings and investments. Housing Benefit and other means-tested benefits use similar savings limits.

The part for your health is protected

If some of your payout is compensation for a personal injury or illness, for example a chest problem or a child's asthma made worse by damp and mould, that part is not counted as savings for the first 12 months. After 12 months it only stays protected if it is put into a special "personal injury trust" or used to buy an annuity. The rest of a disrepair payout, such as money for the inconvenience or a refund of rent, counts as ordinary savings.

What you should do

• Always tell the DWP about a payout. Not declaring it can lead to an overpayment you have to pay back later.
• Get free benefits advice before you spend or move the money. Citizens Advice can check exactly how a payout affects your benefits, for free.
• For a larger, health-related award, ask about a personal injury trust within the first 12 months. It can protect that part of the money for longer.
• Most disrepair payouts are modest. If your savings stay under £6,000, there is nothing to worry about.

Talk to someone

Worried a claim could affect your benefits? Call Support for Tenants free on 0800 030 4669 and we will be honest with you. We can also make sure the panel solicitor knows you are on benefits, so it is handled properly from the start.

Free benefits help: Citizens Advice gives free, independent advice on how any payment affects your Universal Credit or other benefits. The official rules are on gov.uk.

Sources

• Welfare Reform Act 2012 (legislation.gov.uk)
• Universal Credit: money, savings and investments (GOV.UK)