Universal Credit

Does anyone know about the changes to child tax credit. We are on quite a low income but have savings of over 20,000. I've heard that you will not be able to get the new universal credit if you have savings over 16,000. Does that include money in a childs account? Is it best to just spend the money rather than save it?
«13

Comments

  • MX5huggy
    MX5huggy Posts: 6,819
    Name Dropper First Post First Anniversary
    Forumite
    Universal credit is years away, for people that are working. The £16k figure is the current level where you don't get income based JSA or ESA these benefits will be replaced by the Universal Credit and I would expect them to keep the saving levels.

    Keep saving.
  • Jowo_2
    Jowo_2 Posts: 8,308 Forumite
    annewads wrote: »
    ... Is it best to just spend the money rather than save it?

    Google 'Deprivation of capital' and 'notional capital'

    There are rules in place to discourage benefit claimants from frittering away their capital in order to take advantage of means tested benefits.

    Guidance exists which support the need for benefit claimants with capital to use it on their ordinary living expenses, not squander it on a flash car, expensive holiday, gifts of cash to relatives and so forth.

    If a benefit claimant comes into cash, they are expected to spend it on their rent, council tax, groceries and all the typical things they'd spend their benefit money on, and not go on a consumer spree in order to qualify for means tested benefits.
  • zagfles
    zagfles Posts: 20,274
    First Anniversary Name Dropper First Post Chutzpah Haggler
    Forumite
    Yes you are right in that universal credit will replace tax credits, and universal credit will have capital rules the same as IS, HB etc do now - ie you get nothing if you have capital over 16k and a tariff is applied to captial between 6k and 16k.

    However there are transitional rules which state that nobody will lose "in cash terms" but how exactly this will work is unclear. Taken literally if you have an existing claim then that should continue even if you have capital, but what happens if your circumstances change is unclear.

    But as someone else said it's years off (plan is to move tax credits claimants across in 2014-2017).

    If you spend your savings now there is virtually no chance of them pulling the "deprivation of capital" rules, if you spend it just before the switchover, and they decided to change the transitional rules so they don't apply to those with capital, then they might.

    If you have a flexible mortgage, ie one where you can withdraw overpayments, you could use that instead of a savings account. You have the advantages of a savings account (ie you can put money in and take it out) plus the advantages that you don't pay tax on interest (because you're not earning interest, you're paying less interest on your mortgage) and the added advantage that you have no actual savings so you won't be disqualified from means tested benefits should the need to claim arise. It's what I do - i simply never build up "capital"! Not till my mortgage is paid off anyway.
  • zagfles wrote: »
    If you have a flexible mortgage, ie one where you can withdraw overpayments, you could use that instead of a savings account. You have the advantages of a savings account (ie you can put money in and take it out) plus the advantages that you don't pay tax on interest (because you're not earning interest, you're paying less interest on your mortgage) and the added advantage that you have no actual savings so you won't be disqualified from means tested benefits should the need to claim arise. It's what I do - i simply never build up "capital"! Not till my mortgage is paid off anyway.


    don't you think this is still classed as DoC? if you were to apply for SMI for example, wouldnt the lender confirm to JCP that there is an overpayment 'credit' on your account? after all if you have an overpayment facility, you can usually withdraw that amount back with no penalty. so even though so don't have a credit amount showing anywhere as such, you still have x amount of money readily available to you the same as if it was sat in a regualr bank account as a credit sum. it is an interesting area! i wonder if this has been tested before?
  • HappyMJ
    HappyMJ Posts: 21,115
    Combo Breaker First Post
    Forumite
    edited 18 January 2011 at 2:32PM
    skater_kat wrote: »
    don't you think this is still classed as DoC? if you were to apply for SMI for example, wouldnt the lender confirm to JCP that there is an overpayment 'credit' on your account? after all if you have an overpayment facility, you can usually withdraw that amount back with no penalty. so even though so don't have a credit amount showing anywhere as such, you still have x amount of money readily available to you the same as if it was sat in a regualr bank account as a credit sum. it is an interesting area! i wonder if this has been tested before?
    Not 4 years before a change comes into effect it won't be DoC. If you were to apply for SMI it's based on the lowest balance the account has ever been. For example years ago I used 0% balance transfer offers to temporarily pay the mortgage off completely. The banks offered so much credit way back then. Now I'm lucky to get £1000 on a CC limit. I can now never get SMI as the minimum balance ever was £0. I now have a mortgage balance again as the credit cards were paid off at the end of the introductory period using the redraw facility.

    Quite weird when I think about it I had £50,000 owing on 0% CC's and no mortgage interest to pay saving around £200 per month.
    :footie:
    :p Regular savers earn 6% interest (HSBC, First Direct, M&S) :p Loans cost 2.9% per year (Nationwide) = FREE money. :p
  • zagfles
    zagfles Posts: 20,274
    First Anniversary Name Dropper First Post Chutzpah Haggler
    Forumite
    skater_kat wrote: »
    don't you think this is still classed as DoC? if you were to apply for SMI for example, wouldnt the lender confirm to JCP that there is an overpayment 'credit' on your account? after all if you have an overpayment facility, you can usually withdraw that amount back with no penalty. so even though so don't have a credit amount showing anywhere as such, you still have x amount of money readily available to you the same as if it was sat in a regualr bank account as a credit sum. it is an interesting area! i wonder if this has been tested before?

    It's just a credit line - if you have a credit card with a £5000 credit limit, or an overdraft facility, that's also "money readily available" - but just like the overpaid mortgage, they are available credit lines, not savings. You don't need to declare available credit lines to the DWP.
  • Thank you for this. I thought that everyone would be moved over in 2013. I will wait a while before I start juggling money around. Do you know any good sites that explain the rules about universal credit?
  • zagfles
    zagfles Posts: 20,274
    First Anniversary Name Dropper First Post Chutzpah Haggler
    Forumite
    annewads wrote: »
    Thank you for this. I thought that everyone would be moved over in 2013. I will wait a while before I start juggling money around. Do you know any good sites that explain the rules about universal credit?

    http://www.dwp.gov.uk/policy/welfare-reform/legislation-and-key-documents/universal-credit/
  • ubesco
    ubesco Posts: 5 Forumite
    edited 18 January 2011 at 6:41PM
    err, that is not quite right. I decided to reduce my capital to below the £6000 limit in March 2007, in the knowledge that I would leave work in 2009. I needed a good car that would serve me and the family for a few years and not cost a lot to run. I paid £16500 cash for a BMW.
    When I claimed benefit if 2009, nobody even asked me what had happened to the money 2 years earlier. They don't go back very far to check up. If you have capital best to use it a couple of years before you claim

    If things ever get tight, I could always give it to my son and he sells it and gets near enough back what I paid for it.
  • real1314
    real1314 Posts: 4,432 Forumite
    zagfles wrote: »
    Yes you are right in that universal credit will replace tax credits, and universal credit will have capital rules the same as IS, HB etc do now - ie you get nothing if you have capital over 16k and a tariff is applied to captial between 6k and 16k.

    No-one actually knows what the rules will be yet. The capital limit might be £16k, it might be £10k, it might be £20k or it might be £25k.
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 342.4K Banking & Borrowing
  • 249.9K Reduce Debt & Boost Income
  • 449.4K Spending & Discounts
  • 234.6K Work, Benefits & Business
  • 607K Mortgages, Homes & Bills
  • 172.8K Life & Family
  • 247.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards