How Much Savings Are You Allowed on Benefits in the UK?

When it comes to claiming benefits in the UK, the amount of savings you hold can play a critical role in your eligibility.

The Department for Work and Pensions (DWP) applies specific rules to means-tested benefits, where your income and savings are considered in determining the amount you can receive.

This guide will walk through everything you need to know about how savings can affect your benefit entitlement.

What Are the Rules About Savings and Benefits in England and Wales?

In England and Wales, savings influence only means-tested benefits. These are assessed based on your income and capital, which includes money and property.

If you hold savings above certain thresholds, it can reduce your payments or make you ineligible altogether.

The Department for Work and Pensions (DWP) uses capital rules to determine how savings impact each benefit.

If your financial situation changes, such as receiving an inheritance or selling a second property, you are required to inform the relevant benefit authority.

Not all benefits consider your savings, and not all types of assets count as savings. Understanding these distinctions is essential for anyone receiving or applying for financial assistance from the government.

Which Benefits Are Affected by Your Savings?

Several key benefits are affected by the amount of savings you or your partner have. These are considered means-tested because they are based on your income, assets, and savings.

These benefits include:

• Universal Credit
• Income-based Jobseeker’s Allowance (JSA)
• Income-related Employment and Support Allowance (ESA)
• Income Support
• Housing Benefit
• Pension Credit
• Council Tax Reduction (for those with low income or disabilities)

If you live with a partner and claim any of these jointly, both of your savings are considered together. This total is used to calculate any reduction in benefits or to determine if you’re eligible at all.

Which Benefits Are Not Affected by Savings?

Some benefits are not influenced by how much you have in savings. These non-means-tested benefits are awarded based on your circumstances or National Insurance contributions rather than financial means.

These include:

• New Style Jobseeker’s Allowance
• Contributory Employment and Support Allowance (New Style ESA)
• Personal Independence Payment (PIP)
• Disability Living Allowance (DLA)
• Attendance Allowance
• Carer’s Allowance
• State Pension

These benefits continue to be paid regardless of the amount of capital or assets you possess.

What Counts as Savings or Capital?

The DWP defines savings broadly under the term “capital.” This includes a wide range of financial assets that are either immediately available or can be converted into cash.

Items considered savings or capital include:

• Money in current accounts, savings accounts, or fixed-term deposits
• National Savings products like Premium Bonds or Income Bonds
• Stocks, shares, and ISAs
• Property other than your primary residence

These forms of capital are assessed during a benefits application and during periodic reviews. The value of your savings is compared against established thresholds to determine eligibility or reductions in benefit payments.

What Doesn’t Count as Savings for Benefits?

Some items are specifically excluded from the capital rules. These exclusions prevent necessary or personal assets from disqualifying a person from receiving financial help.

Items not counted as savings include:

• Your main home (the property you live in)
• Work or private pensions not yet withdrawn
• A car or motorbike used for personal use
• Jewellery or personal heirlooms
• Compensation payments for personal injury (if kept for under a year)
• Benefits back payments that are less than one year old
• Tools or assets required for self-employment or running a business

These exclusions ensure that essential possessions or necessary financial tools do not negatively impact someone’s ability to claim benefits.

What Are the Savings Limits for Means-Tested Benefits?

Each means-tested benefit has specific capital thresholds that determine how savings impact your eligibility. The general framework is the same across most benefits for working-age claimants.

The DWP assumes an income from savings over £6,000. For every £250 above this threshold, the following is deducted:

• £1 per week for Income-based JSA, ESA, Income Support, and Housing Benefit
• £4.35 per month for Universal Credit

Example Calculation:

If someone has £8,000 in savings, that is £2,000 above the £6,000 threshold. For Income-related ESA, this equates to a reduction of £8 per week.

How Do Savings Limits Change Over State Pension Age?

When a claimant reaches State Pension age, the rules for certain benefits become more lenient. Housing Benefit and Pension Credit use different thresholds for assessing savings.

In the case of a couple where one person is over the State Pension age and the other is not, the working-age rules apply if the benefit is claimed jointly.

How Does Pension Credit Treat Savings?

Pension Credit is designed to help people over State Pension age who have a low income. It consists of two parts: Guarantee Credit and Savings Credit.

There is no upper limit for savings when applying for Pension Credit. However, for the Guarantee Credit portion, the first £10,000 of your savings is ignored. After this, each £500 counts as £1 of assumed weekly income.

This notional income can reduce your Guarantee Credit, but many people with moderate savings still qualify.

What Happens If Your Savings Increase?

Your financial situation can change over time, and an increase in savings is one of the most common reasons for a shift in benefits eligibility. This may occur if you:

• Receive a compensation or insurance payout
• Sell a property
• Cash out investments or pensions
• Accumulate unspent benefit payments

The DWP requires you to report any significant change in your savings. If you fail to do so, you may receive an overpayment, which will need to be paid back. In more serious cases, penalties or legal action may be taken.

How Do Inheritance and Lump Sum Payments Affect Benefits?

Receiving an inheritance or a lump sum payment can significantly affect your entitlement to means-tested benefits in the UK. These types of financial windfalls are treated as capital by the Department for Work and Pensions (DWP), and they are included in your total savings when calculating eligibility.

Inheritance and Benefits

When you inherit money, property, or other financial assets, they are typically added to your existing savings. If the total value of your savings increases above the DWP thresholds (usually £6,000 and £16,000 for working-age claimants), it can either reduce your benefit amount or make you ineligible altogether.

For example, if you are receiving Universal Credit and inherit £12,000, this amount will be considered capital. Since it’s over the £6,000 lower threshold, your monthly Universal Credit payments will be reduced based on the assumed income from that inheritance. If the inheritance pushes your total savings above £16,000, your claim for Universal Credit would stop entirely.

Inheriting property has slightly more complex implications:

• If you inherit a property and live in it, it is not counted as capital.
• If you do not live in the inherited property, its market value will be considered as part of your total savings.
• If you sell a property, the proceeds will be treated as capital and must be reported.

In some cases, a property may be considered disregarded capital, meaning it won’t be counted toward your savings. For example, if a close relative who is disabled or over pension age lives in the inherited property, its value might not be counted.

Lump Sum Payments and Benefits

Lump sum payments come from various sources and are treated similarly to inheritance. These can include:

• Redundancy pay
• Insurance settlements
• Compensation awards
• Backdated benefits
• Work-related pension lump sums
• Personal injury compensation

Once you receive a lump sum, it is added to your savings and evaluated under the same capital rules. This could impact several benefits, including:

• Universal Credit
• Income Support
• Housing Benefit
• Income-based JSA and ESA
• Pension Credit (depending on the amount and your age)

Certain lump sums are temporarily disregarded if kept in a separate account and spent within a reasonable timeframe. For example:

• Personal injury compensation is ignored for up to 52 weeks.
• Backdated benefit payments are disregarded for up to 12 months.

After these time limits, the money is assessed as capital unless it has been spent on reasonable and necessary expenses.

Reporting Requirements

If you receive any inheritance or lump sum payment while claiming benefits, you must report it to the relevant authority immediately. Failing to do so can lead to:

• Overpayment of benefits, which you’ll be required to pay back
• Suspension or termination of your benefits
• Financial penalties or prosecution in severe cases

The DWP may also investigate how the funds are spent. If they believe you deliberately spent or transferred the money to stay under the savings threshold, this could be considered deprivation of capital. In such cases, they may still assess your benefits as if you had the money.

How Can You Check Your Benefit Eligibility with Savings?

If you are unsure how your savings impact your benefits, several tools and services are available:

• The Turn2Us Benefits Calculator allows you to input your financial details and get an overview of potential entitlements
• The entitledto calculator works similarly and is used widely by advisers and charities
• You can contact Jobcentre Plus directly for official information regarding your claim

Keeping track of changes in your capital and knowing how they apply to each benefit type is key to maintaining your entitlement.

What Are the Most Common Mistakes People Make About Savings and Benefits?

Mistakes often arise due to confusion about what qualifies as savings and how it affects benefit entitlements. Some of the most frequent errors include:

• Assuming non-cash assets like jewellery or vehicles are counted
• Not reporting lump sum payments or inheritance
• Believing that joint savings are assessed separately
• Failing to notify the DWP about capital changes within the required timeframe

Ensuring accuracy in your benefit claims not only prevents overpayments but also protects you from penalties. Being informed and proactive is the best way to maintain the support you are entitled to.

Conclusion

Savings can significantly influence the amount and type of benefits you receive in the UK. For most means-tested benefits, savings under £6,000 won’t affect your entitlement.

Between £6,000 and £16,000, your benefits may be reduced. Above £16,000, most means-tested benefits stop altogether.

However, non-means-tested benefits are unaffected regardless of how much you’ve saved.

It’s essential to understand what counts as savings, stay informed on the latest thresholds, and report any changes to avoid penalties.

Use trusted benefit calculators or speak with organisations like Scope to get tailored advice for your situation.

FAQs

What benefits are means-tested in the UK?

Means-tested benefits include Universal Credit, Housing Benefit, Income-based JSA, Income-related ESA, Income Support, and Pension Credit. These consider your income and savings.

Can I still get Universal Credit if I have savings?

Yes, but only if your savings are below £16,000. Savings between £6,000 and £16,000 reduce your monthly payment.

Do Premium Bonds count as savings?

Yes. Premium Bonds are counted as capital and are included in the DWP’s assessment for means-tested benefits.

Will my inheritance affect my benefit entitlement?

An inheritance can impact your benefits if it pushes your savings above the limits. It’s important to report this to the DWP as soon as possible.

Is my pension considered savings?

Pensions are not considered savings unless you withdraw the funds. Once withdrawn, they are treated as capital and may affect your benefits.

Can I give away savings to qualify for benefits?

Deliberately reducing your savings to claim benefits (known as deprivation of capital) can disqualify you from receiving benefits. The DWP investigates such actions.

How long do I have to report a change in my savings?

You should report changes immediately. Delays can result in overpayments or penalties.