Universal Credit quandary

Fizzy80

I'm pretty upset as I've just been informed UC will pay me £0 each month after loosing my therapy business which was less than a year old. 
I've jumped through all the hoops and they confirmed that my savings and property will not count against my UC claim. Also I cant sell it due to the crisis, so they consider it to be worth £0.

I previously went through a long conversation on the phone with someone about all the details about my property. I get £1150 a month in rent. After mortgage, service charges, insurance, tax, I am left with basically nothing a month or a minus if there are repairs. 

In the payment area of my claim, It tells me I am entitled to £600 month. This goes down to £0 because they deduct £1150 as 'other income'. Firstly, it doesn't look like property rent is classed as other income. Secondly, it is going in and out of my account, so it is not income I have spare that I can spend it on food or to pay my mortgage bills. Why would they not have at least factored in that I pay tax on it? 

Does this sound like it could be a mistake? It says I have to write in to raise a dispute. Meanwhile I cant pay for anything and me and my 5 year old daughter have been without income for 6 weeks. 

I'd really welcome advice from anyone who knows about this.
 

[Deleted User]

 Not a mistake, it is other income and the fact it leaves your account immediately is irrelevant. You obtain this increase me and it's counted as such. 

Fizzy80

When I've looked it up, its not there as an example of other income. 
Sorry Im missing the second bit due to a typo?

Vestraun

Is this a second property? Can you take a payment holiday on the mortgage?

Fizzy80

Rental income is not listed in section 66 of "What is included in unearned income?

Jeremy535897

The advice to UC decision makers states:
"H5094 The types of income which might be derived from capital include
1. interest
2. dividends and
3. rental income.
Example 1
Pierre-Michel has savings of £8,000 held in a bank account. This means, that for the purposes of Pierre-Michel’s award of UC, the £8,000 is deemed to yield a monthly income of £34.80. At the end of the financial year, the bank credits Pierre-Michel with £170 interest on the savings. The DM treats this £170 as a payment of capital. Pierre-Michel now has £8,170 in capital yielding a monthly income of £39.15.
Example 2
Scoot owns a second property which he does not live in as his home. Scoot rents the property and receives rental income as a result. For UC, the capital (the second property in this example) is treated as yielding an income and the actual income derived from that capital (the rental income) is treated as part of Scoot’s capital from the date it is due to be paid."

In other words, if you own a property that you rent out, the rental income does not count as income for UC, but the value of the property (less the mortgage on it) is treated as capital, just like money in the bank is. So if the equity in the rental property plus all other capital exceeds £16,000, no UC is payable. In addition the actual  net rent received, unless legitimately spent for UC purposes, adds to the capital attributed to the claimant.

calcotti

My understanding is that rental income should be ignored. The property itself, if you are not living in it, should be taken into account as capital and that may exclude you from claiming unless you initiate steps to sell it.

[Deleted User]

Oh my, learn something everyday here 

Fizzy80

Jeremy535897 said:

The advice to UC decision makers states:
"H5094 The types of income which might be derived from capital include
1. interest
2. dividends and
3. rental income.
Example 1
Pierre-Michel has savings of £8,000 held in a bank account. This means, that for the purposes of Pierre-Michel’s award of UC, the £8,000 is deemed to yield a monthly income of £34.80. At the end of the financial year, the bank credits Pierre-Michel with £170 interest on the savings. The DM treats this £170 as a payment of capital. Pierre-Michel now has £8,170 in capital yielding a monthly income of £39.15.
Example 2
Scoot owns a second property which he does not live in as his home. Scoot rents the property and receives rental income as a result. For UC, the capital (the second property in this example) is treated as yielding an income and the actual income derived from that capital (the rental income) is treated as part of Scoot’s capital from the date it is due to be paid."

In other words, if you own a property that you rent out, the rental income does not count as income for UC, but the value of the property (less the mortgage on it) is treated as capital, just like money in the bank is. So if the equity in the rental property plus all other capital exceeds £16,000, no UC is payable. In addition the actual  net rent received, unless legitimately spent for UC purposes, adds to the capital attributed to the claimant.

Thanks that's really useful. Looks like I will have to argue it with them. Although they have already said that 'the decision maker has determined that you have capital less than £6,000 and therefore your capital, including your other property has no impact upon your UC entitlement.'
Does this justify the reason for not using Rental income as other income? 

calcotti

Fizzy80 said: Thanks that's really useful. Looks like I will have to argue it with them. Although they have already said that 'the decision maker has determined that you have capital less than £6,000 and therefore your capital, including your other property has no impact upon your UC entitlement.'

Does this justify the reason for not using Rental income as other income? 

Arguably yes but the DM appears to have made an incorrect decision in respect of whether or not the property should be counted as capital - unless for some reason it has no value.

Jeremy535897

It sounds to me that they have decided that the value of the let property less the mortgage is small. They should not be taking any note of the actual rent except in computing capital going forward. In any event, the quantum of that capital would have to take account of the expenses (like mortgage interest) properly and necessarily paid out of it. No doubt calcotti will put me right if I am misunderstanding. I don't understand your last sentence. Rental income is not other income. Deemed income from the capital value of property is income for UC, hence why you can't get any UC if you have capital over £16,000.