Tax Credits becoming Universal Credit

KennyPalin

Hi folks, i am looking for some clarification regarding the transition from tax credits to universal credit as i fear i may lose out significantly due to this change. Im sure this is a common thread on here.

From what i have read online i believe that unlike Tax Credits the new Universal Credit is means tested and anyone with "assets" over £16,000 will be disqualified.

My situation is as follows

My wife works full time and earns around £16,000
I am a house husband who looks after our 2 young (pre school) children

Several years ago my mother gifted me her home and continues to live in it and pays me market rent for it, my mother is in her 80's. The income i recieve after deductions is around £400 a month

I have no idea what my mothers home is worth but obviously it would be worth well over the £16,000 limit for assets specified with Universal Credit.

I would like to know if owning my mothers home would now prevent us from recieving Universal Credit. This was not a problem with tax credit as only my income was taken into account and not the value of the home.

I have been googling all morning but cannot find a conclusive answer anywhere. I have however found the link below which seems to imply that as my assets is my mothers home it can disregarded under Schedule 10 point 2. Although im not sure if this is allowed given that we also own are own home.

As new user i am unable to post links but here is a copy of the text from the legislation

"
Capital to be disregarded
Premises
1.
(1) Premises occupied by a person as their home.
(2)
For the purposes of this paragraph and paragraphs 2 to 5, only one set of premises may be
treated as a person’s home.
2.
Premises occupied by a close relative of a person as their home where that close relative has
limited capability for work or has reached the qualifying age for state pension credit"




Some advice would be much appreciated. Im not looking to bend the system and receive something i am not entitled to I simply would like some time to prepare myself financially if we are going to lose out under the transition to Universal Credit.

Thanks in advance
Kenny

sammyjammy

Yes it would stop you receiving Universal Credit as the value of the home would be counted as capital.

Are you actually saying your mother signed over her house to you and you now charge her rent?

The house would not be disregarded just becasue your mother lives in it.

KennyPalin

sammyjammy wrote: »

Are you actually saying your mother signed over her house to you and you now charge her rent?

.

Yes but this is the law regarding these issue, you cannot sign over a house and continue to live in it without paying market rent and having a tenancy agreement. However i havent came on here to discuss that point.


As for my original point, i believe from reading this forum i would not lose out on Universal Credit as those on tax credits are guaranteed no loss to their income due to a "transitional protection" regardless of assets, is this correct?

Icequeen99

KennyPalin wrote: »

Yes but this is the law regarding these issue, you cannot sign over a house and continue to live in it without paying market rent and having a tenancy agreement. However i havent came on here to discuss that point.


As for my original point, i believe from reading this forum i would not lose out on Universal Credit as those on tax credits are guaranteed no loss to their income due to a "transitional protection" regardless of assets, is this correct?

Transitional protection only applies to those who are moved across by HMRC/DWP. If you have any change of circumstance before that happens and you have to claim UC you won't get transitional protection.

And transitional protection will end if certain changes take place after the move. The rules for those with capital have not yet been made clear, but I certainly wouldn't bank on the protection.

And whilst you didn't come here to discuss the issue re the house, i would hope you took legal advice and more importantly tax advice because the law doesn't make it a requirement to pay market rent if you hand over your house.

IQ

xylophone

And whilst you didn't come here to discuss the issue re the house, i would hope you took legal advice and more importantly tax advice because the law doesn't make it a requirement to pay market rent if you hand over your house.

The OP and his mother have taken advice on IHT? See http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm

"Giving your home away and continuing to live in it
You can continue to live in your home as your primary residence after giving it away, provided you pay a market rent to the new owner. Bear in mind that the new owner may have to pay Income Tax on the rent you pay them.
If you don't pay a market rent, the gift will be considered a 'gift with reservation of benefit' and the house may be subject to Inheritance Tax."

Dunroamin

Do your current tax credits take into account the rental income you receive?

pmlindyloo

KennyPalin wrote: »

Hi folks, i am looking for some clarification regarding the transition from tax credits to universal credit as i fear i may lose out significantly due to this change. Im sure this is a common thread on here.

From what i have read online i believe that unlike Tax Credits the new Universal Credit is means tested and anyone with "assets" over £16,000 will be disqualified.

My situation is as follows

My wife works full time and earns around £16,000
I am a house husband who looks after our 2 young (pre school) children

Several years ago my mother gifted me her home and continues to live in it and pays me market rent for it, my mother is in her 80's. The income i recieve after deductions is around £400 a month

I have no idea what my mothers home is worth but obviously it would be worth well over the £16,000 limit for assets specified with Universal Credit.

I would like to know if owning my mothers home would now prevent us from recieving Universal Credit. This was not a problem with tax credit as only my income was taken into account and not the value of the home.

I have been googling all morning but cannot find a conclusive answer anywhere. I have however found the link below which seems to imply that as my assets is my mothers home it can disregarded under Schedule 10 point 2. Although im not sure if this is allowed given that we also own are own home.

As new user i am unable to post links but here is a copy of the text from the legislation

"
Capital to be disregarded
Premises
1.
(1) Premises occupied by a person as their home.
(2)
For the purposes of this paragraph and paragraphs 2 to 5, only one set of premises may be
treated as a person’s home.
2.
Premises occupied by a close relative of a person as their home where that close relative has
limited capability for work or has reached the qualifying age for state pension credit"




Some advice would be much appreciated. Im not looking to bend the system and receive something i am not entitled to I simply would like some time to prepare myself financially if we are going to lose out under the transition to Universal Credit.

Thanks in advance
Kenny

To get back from the original question!

I have found this link http://www.grandcharity.org/data/files/NEWSITE/MRG/Universal_Credit_Factsheet.pdf

which says the capital rules are the same as for Income Support.

Those rules say that a property that you own and do not live in but is occupied by a close relative who has reached state pension age is disregarded.

KennyPalin

Dunromin

thats a strange question to ask as i cant see how its releveant to this thread, why do you need to know this?

but yes of course my rental income is part of my tax credit calculations (and income tax)

not everyone is trying to play the system, some of us are just trying to ensure we have the correct information at hand with no hidden agenda.

Marker_2

KennyPalin wrote: »

Dunromin

thats a strange question to ask as i cant see how its releveant to this thread, why do you need to know this?

but yes of course my rental income is part of my tax credit calculations (and income tax)

not everyone is trying to play the system, some of us are just trying to ensure we have the correct information at hand with no hidden agenda.

Well you are playing the system. To get around inheritance tax from the house, your mother has gifted it to you and pays "rent". She must have one hell of a pension to be able to afford £400 rent per month as assumingly she isn't entitled to any housing benefit. It is clear as day you are playing the system with regards to the house. I can't knock you for it as I would do the exact same thing, but let's not play with eachother.

KennyPalin

yes but marker whats the relevance my mothers income or inheritence tax situation?

i asked a question about tax credit/universal credit, people seem more interested in asking me irrelevant questions that answering the original question. If people arent prepared to help then maybe saying nothing is the best policy?

Marker_2

KennyPalin wrote: »

yes but marker whats the relevance my mothers income or inheritence tax situation?

i asked a question about tax credit/universal credit, people seem more interested in asking me irrelevant questions that answering the original question. If people arent prepared to help then maybe saying nothing is the best policy?

I don't know where you live or how much your mums house is worth. Its probably a good few thousand. You own TWO houses, and are supposedly earning an extra £400pm on rent for one of those properties. Despite your wife only earning £16k you are financially very well off.

Sell the mothers house and stick all the money in the bank. You won't have to worry about losing or applying for tax credits/universal tax credits then.

OR if I was in your position. Keep quiet and don't ask on a public forum how to keep the extra house without losing tax credits.