Am I allowed to invest in a Stocks & Shares ISA whilst claiming benefits?

Gary_2021

Hello

I'm wondering if I'm allowed to invest into a Stocks & Shares ISA, whilst claiming benefits. Would investing count as earning income if I receive dividends within the S&S ISA, without withdrawing any capital/ dividends or profits out of the ISA?

I've been trying to get clear answers on this because I would really like to start investing but i'm unsure on the rules regarding entitlement to benefits and whether it would count as earned income

Alice_Holt

Yes. You can contribute to an ISA

What benefits are you claiming?

Gary_2021

Alice_Holt said:

Yes. You can contribute to an ISA

What benefits are you claiming?

I'm claiming ESA and Housing Benefit. I realize I can contribute to an ISA but am I allowed to invest in stocks an shares that pay dividends and grow in value. Do you know whether that will be classed as income if I don't withdraw those dividends out of an ISA

Alice_Holt

Dividends and investment growth will not be classed as income, they increase the value of your capital.

Means tested benefits have a capital / savings limit of £16k.  Capital / savings above £6k will attract a notional tariff income which will reduce the amount of benefit paid:

 https://www.entitledto.co.uk/help/savings


However,
    You may wish to consider if having an emergency fund in an instant cash account is better than an S&S ISA;

  Equities are better held for the very long-term to balance out the volatility of stock values. You do not want to be a forced seller, at a time when your fund has fallen in value by 40%  (not an unusual occurrence).

  If you wish to invest, then also consider a SIPP. Contributions attract a tax uplift, can be invested in the same funds as an ISA (but with a different tax wrapper), a SIPP is excluded from capital for mean-tested benefits, and can (currently) be accessed at the age of 55. 

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/self-invested-personal-pensions?source=mas#

poppy12345

Also if you're claiming council tax reduction then all local councils have their own rules for savings limits and some have a maximum savings of £6,000.

Gary_2021

Alice_Holt said:

Dividends and investment growth are not classed as income, they increase the value of your capital.

Means tested benefits have a capital / savings limit of £16k.  Capital / savings above £6k will attract a notional tariff income which will reduce the amount of benefit paid:

 https://www.entitledto.co.uk/help/savings

Thank you, how sure of you that this is true? Before I commit to investing, I need to be 100% sure. I read a post saying that someone had a £1 bond in Nationwide building society and it made him ineligible to claim means tested benefits. Some others have also said that dividends maybe classed as earned income. Now you say that it's not classed as income. I really hope you are right as I want to get into the world of investing but something tells me that it will effect my benefits in some way

Alice_Holt

GaryMSE said:

Alice_Holt said:

Dividends and investment growth are not classed as income, they increase the value of your capital.

Means tested benefits have a capital / savings limit of £16k.  Capital / savings above £6k will attract a notional tariff income which will reduce the amount of benefit paid:

 https://www.entitledto.co.uk/help/savings

Thank you, how sure of you that this is true? Before I commit to investing, I need to be 100% sure. I read a post saying that someone had a £1 bond in Nationwide building society and it made him ineligible to claim means tested benefits. Some others have also said that dividends maybe classed as earned income. Now you say that it's not classed as income. I really hope you are right as I want to get into the world of investing but something tells me that it will effect my benefits in some way

      https://www.scope.org.uk/advice-and-support/how-savings-affect-means-tested-benefits/

      "There are many reasons why savings might increase

• Shares or bonds go up in value and pay dividends."
  
  
  

Spoonie_Turtle

GaryMSE said:

Alice_Holt said:

Dividends and investment growth are not classed as income, they increase the value of your capital.

Means tested benefits have a capital / savings limit of £16k.  Capital / savings above £6k will attract a notional tariff income which will reduce the amount of benefit paid:

 https://www.entitledto.co.uk/help/savings

Thank you, how sure of you that this is true? Before I commit to investing, I need to be 100% sure. I read a post saying that someone had a £1 bond in Nationwide building society and it made him ineligible to claim means tested benefits. Some others have also said that dividends maybe classed as earned income. Now you say that it's not classed as income. I really hope you are right as I want to get into the world of investing but something tells me that it will effect my benefits in some way

I'm glad to see you don't automatically believe everything you read on the internet as lots of benefit claimants don't understand the system so post erroneous things like this.

From the Decision Makers Guide https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/932378/dmgch52.pdf

52762 Claimants are treated as having tariff income of £1 a week for each complete £250 of capital over

1. £6,000 up to and including £16,000

2. £10,000 up to and including £16,000 if DMG 52770 applies.

They are also treated as having tariff income of £1 a week for any capital which is left and which is not a 

complete £250           1. See Appendix 3 to this Chapter, for a table which shows how to work out tariff income.


https://www.gov.uk/government/publications/decision-makers-guide-vols-8-and-9-employment-and-support-allowance-staff-guide has the complete DMG for ESA should you wish to check further.  My brain has ground to a halt so I cant sift through and find the relevant bits about dividends, but for income regularity is the key (and regular dividends of the same amount may be classed as unearned income, not earned).  One-off and therefore irregular dividends would only be classed as capital.

Edit: incidentally checking your sources also means you can look at posters' post histories - if you do so, you will be able to decide for yourself whether you believe Alice_Holt's advice to be reliable and well-informed

Gary_2021

Spoonie_Turtle said:

GaryMSE said:

Alice_Holt said:

Dividends and investment growth are not classed as income, they increase the value of your capital.

Means tested benefits have a capital / savings limit of £16k.  Capital / savings above £6k will attract a notional tariff income which will reduce the amount of benefit paid:

 https://www.entitledto.co.uk/help/savings

Thank you, how sure of you that this is true? Before I commit to investing, I need to be 100% sure. I read a post saying that someone had a £1 bond in Nationwide building society and it made him ineligible to claim means tested benefits. Some others have also said that dividends maybe classed as earned income. Now you say that it's not classed as income. I really hope you are right as I want to get into the world of investing but something tells me that it will effect my benefits in some way

I'm glad to see you don't automatically believe everything you read on the internet as lots of benefit claimants don't understand the system so post erroneous things like this.

From the Decision Makers Guide https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/932378/dmgch52.pdf

52762 Claimants are treated as having tariff income of £1 a week for each complete £250 of capital over

1. £6,000 up to and including £16,000

2. £10,000 up to and including £16,000 if DMG 52770 applies.

They are also treated as having tariff income of £1 a week for any capital which is left and which is not a 

complete £250           1. See Appendix 3 to this Chapter, for a table which shows how to work out tariff income.


https://www.gov.uk/government/publications/decision-makers-guide-vols-8-and-9-employment-and-support-allowance-staff-guide has the complete DMG for ESA should you wish to check further.  My brain has ground to a halt so I cant sift through and find the relevant bits about dividends, but for income regularity is the key (and regular dividends of the same amount may be classed as unearned income, not earned).  One-off and therefore irregular dividends would only be classed as capital.

Edit: incidentally checking your sources also means you can look at posters' post histories - if you do so, you will be able to decide for yourself whether you believe Alice_Holt's advice to be reliable and well-informed

Thank you for your response and for the link, I will look into the DMG because I'm still confused about dividends and income. Say for example I buy a fund of shares that pay dividends quarterly, would this be classed as regular unearned income and would this unearned income affect benefit entitlement, taking into consideration that I will not be withdrawing these dividends out of an ISA?  

poppy12345

GaryMSE said:

Spoonie_Turtle said:

GaryMSE said:

Alice_Holt said:

Dividends and investment growth are not classed as income, they increase the value of your capital.

Means tested benefits have a capital / savings limit of £16k.  Capital / savings above £6k will attract a notional tariff income which will reduce the amount of benefit paid:

 https://www.entitledto.co.uk/help/savings

Thank you, how sure of you that this is true? Before I commit to investing, I need to be 100% sure. I read a post saying that someone had a £1 bond in Nationwide building society and it made him ineligible to claim means tested benefits. Some others have also said that dividends maybe classed as earned income. Now you say that it's not classed as income. I really hope you are right as I want to get into the world of investing but something tells me that it will effect my benefits in some way

I'm glad to see you don't automatically believe everything you read on the internet as lots of benefit claimants don't understand the system so post erroneous things like this.

From the Decision Makers Guide https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/932378/dmgch52.pdf

52762 Claimants are treated as having tariff income of £1 a week for each complete £250 of capital over

1. £6,000 up to and including £16,000

2. £10,000 up to and including £16,000 if DMG 52770 applies.

They are also treated as having tariff income of £1 a week for any capital which is left and which is not a 

complete £250           1. See Appendix 3 to this Chapter, for a table which shows how to work out tariff income.


https://www.gov.uk/government/publications/decision-makers-guide-vols-8-and-9-employment-and-support-allowance-staff-guide has the complete DMG for ESA should you wish to check further.  My brain has ground to a halt so I cant sift through and find the relevant bits about dividends, but for income regularity is the key (and regular dividends of the same amount may be classed as unearned income, not earned).  One-off and therefore irregular dividends would only be classed as capital.

Edit: incidentally checking your sources also means you can look at posters' post histories - if you do so, you will be able to decide for yourself whether you believe Alice_Holt's advice to be reliable and well-informed

Thank you for your response and for the link, I will look into the DMG because I'm still confused about dividends and income. Say for example I buy a fund of shares that pay dividends quarterly, would this be classed as regular unearned income and would this unearned income affect benefit entitlement, taking into consideration that I will not be withdrawing these dividends out of an ISA?  

As has been advised a few times here, it's classed as savings, which means if they go over £6,000 you will need to report the changes.

Alice_Holt

Per Spoonie - 
"One-off and therefore irregular dividends would only be classed as capital."

Particularly as the OP stated he intends to "receive dividends within the S&S ISA, without withdrawing any capital/ dividends or profits out of the ISA". 
He would likely be investing in accumulating funds rather than income funds.
https://www.money.co.uk/guides/whats-the-difference-between-income-and-accumulation-funds.htm