Thousands of claimants could be caught out by a little-known rule requiring certain compensation, support payments and protected savings to be reported to the DWP.
Universal Credit claimants are being urged to check their finances after the Department for Work and Pensions confirmed six types of money that must be declared—even when they may ultimately be excluded from savings calculations.
The surprising part is that receiving one of these payments does not automatically mean your Universal Credit will be reduced. However, claimants must still report the money so the DWP can determine whether a temporary or permanent exemption applies.
Here are the six categories highlighted in the Manchester Evening News report.
1. Personal injury or illness compensation
Compensation received because of an injury or illness must be reported.
Official guidance says these payments are generally disregarded for the first 12 months. After that period, continued protection may depend on how the money is held—for example, whether it has been placed in a trust or used to purchase an annuity.
2. Compensation linked to traumatic events
Payments from special compensation schemes must also be declared, even though many are not counted as capital.
This can include compensation connected to the Post Office Horizon scandal, infected blood schemes, the Grenfell Tower fire, the Windrush Compensation Scheme and certain miscarriages of justice.
The government warns that its published list is not exhaustive.
3. Welfare-support payments
Some payments designed to help people through financial hardship may be disregarded for a limited period, but they still need to be reported.
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Examples can include benefits arrears, payments from the Social Fund and certain local-authority welfare payments. Many qualifying payments are excluded from savings calculations for up to 12 months.
4. Bereavement Support Payments
Money received following the death of a spouse or civil partner must be disclosed.
Bereavement Support Payments—previously linked to Widowed Parent’s Allowance—may be disregarded for up to 12 months. Claimants should not assume the DWP already has all the necessary information simply because another government department issued the payment.
5. Money from selling your home
The proceeds from selling your main home must be reported, including money intended for the purchase of another property.
These funds are normally disregarded for six months when the claimant plans to buy another home. The exemption may be extended in special circumstances, but the DWP must decide whether the conditions have been met.
6. Money reserved for a self-employed tax bill
Self-employed claimants must disclose money being held for tax payments.
Although these funds may be excluded from the claimant’s assessable capital, they should not simply be left unreported. Records showing that the money is genuinely reserved for tax could be important if the DWP requests evidence.
The savings limits claimants cannot ignore
Universal Credit is means-tested, so savings belonging to both the claimant and a live-in partner can affect the award—even when the partner is not personally eligible.
Under the current rules:
- Capital below £6,000 normally does not reduce Universal Credit.
- Between £6,000 and £16,000, payments are reduced by £4.35 a month for every £250, or part of £250, above the lower limit.
- Claimants with more than £16,000 are usually ineligible.
Cash, bank accounts, PayPal balances, ISAs, Premium Bonds, investments, cryptocurrency, inheritances and certain overseas property can all count as capital.
What happens if money is not reported?
Changes should be reported through the claimant’s online Universal Credit account as soon as they occur.
Reporting late—or failing to report a change—can result in an overpayment that must be repaid, potentially through deductions from future benefits. Deliberately supplying false information or moving money solely to increase an award can also lead to penalties or prosecution.
The crucial message is simple: “disregarded” does not mean “do not declare.” Claimants should report the payment and allow the DWP to determine how it should be treated.
Full eligibility rules and reporting instructions are available through the official GOV.UK Universal Credit capital guidance.
This article provides general information and is not personalised benefits advice.
