Tax credits and lump sum.

swingaloo

Just needed some advice for a friend of ours. He owns his own home and is self employed. He lives with his partner who works and they have a joint claim for tax credits.
He pays CSA to his ex wife and has some credit card debt and is really struggling to make ends meet and so has decided to sell his house and rent.

I would assume it could take quite some time to sell but he anticipates having about 30K equity if he sells.

His plan is to pay off his credit card and loan with it.

I don't claim any tax credits or benefits so am not really in a position to advise him but there is a little niggling worry at the back of my mind that if he gets a lump sum it would affect any benefit he gets ( I think its only tax credits but don't know for sure) and so he cannot just pay off his credit card as it would be seen to be depriving himself of capital.

Is that correct or would he be free to do as he wishes if it is only tax credits he gets?

thank you for reading.

Upsidedown_Bear

If he is only receiving tax credits then capital is not usually taken into account.
See page 22 here:
http://www.hmrc.gov.uk/leaflets/wtc2.pdf

swingaloo

Thank you for that, much appreciated.