UC - I appear to be screwed??

LG54

I have received my migration letter for transferring from child and working tax credits to UC. I am a single parent with 2 dependents, working 34 hours a week and currently rely on my working tax credits to be able to meet all my bills and living costs.

I own with a mortgage a flat which I let out and also rely on the income from this each month to meet living costs, as my job is not well paid. (Have a second mortgage on the property we live in).

As far as I can see, by owning the flat I am not entitled to any support from UC. There is around £80K equity in the flat (of which at least half would be eaten up, if I sold, from the requirement to extend the lease, capital gains tax and other selling costs).

Very worried. I cannot meet costs each month without the income top up I currently get in tax credits. Am I right in thinking UC will not help me at all?

Any suggestions for what to do? If I sell the flat I will need to use any profit made to pay off debts occurred in the interim before receiving money from the sale, and then for living costs. Thereafter I suppose I would then qualify for a large amount of support from UC due to having zero investment for the future, and even lower income (no income from renting the flat each month)!

Thank you.

Alice_Holt

LG54 said:

I have received my migration letter for transferring from child and working tax credits to UC. I am a single parent with 2 dependents, working 34 hours a week and currently rely on my working tax credits to be able to meet all my bills and living costs.

I own with a mortgage a flat which I let out and also rely on the income from this each month to meet living costs, as my job is not well paid. (Have a second mortgage on the property we live in).

As far as I can see, by owning the flat I am not entitled to any support from UC. There is around £80K equity in the flat (of which at least half would be eaten up, if I sold, from the requirement to extend the lease, capital gains tax and other selling costs).

Very worried. I cannot meet costs each month without the income top up I currently get in tax credits. Am I right in thinking UC will not help me at all?

Any suggestions for what to do? If I sell the flat I will need to use any profit made to pay off debts occurred in the interim before receiving money from the sale, and then for living costs. Thereafter I suppose I would then qualify for a large amount of support from UC due to having zero investment for the future, and even lower income (no income from renting the flat each month)!

Thank you.

     https://revenuebenefits.org.uk/universal-credit/guidance/existing-tax-credit-claimants/managed-migration/transitional-protection/

   You will receive transitional protection for 12 months. This will give you a breathing space to decide what to do with the flat and the realisable capital it represents.
    

NedS

The good news is that for managed migration claimants (that is you), there is a 12 month disregard on your capital over £16k so you can claim UC under managed migration rules for up to 12 months. After which, if you still have capital in excess of £16k, your entitlement to UC will end.

You must declare the second property when you make your claim, and it's capital value over £16k will be disregarded for 12 months.

If you are unable to sustain both properties after 12 months without the support of benefits, you effectively have 12 months to sell the flat.

Rubyroobs

You will still have a significant reduction in UC income due to having savings/ equity over 6k- 16k. i guess whether you will receive any UC after this has been deducted depends on your total UC and deductions for earnings. 

LG54

Thank you, the migration period does give some breathing space. 

Realistically I will need to sell the flat to use the money to live, and then claim from UC once that money runs out.

It does seem ill thought out for people in my situation, who ultimately will end up costing the tax payer much more each month through being forced to give up income (rent from the flat) and give up any efforts to make a better future that does not rely on benefits!

peteuk

You are not being screwed, you dont currently fit the criteria for UC. The government will argue why should they support you when youve £80K of assets,  I understand the argument that this brings in income and benefits you in the future, equally if the rent covers the mortgage for the flat then selling it will not add to your disposable income.  The transition period helps. 

One question where are you currently living? Could you move into the flat?

You dont have to sell it, but obviously in 12 months you’ll loose your benefits, the situation with the COL/inflation may have changed by then. 
Could you look at support elsewhere, school breakfast clubs/wrap around childcare etc. 

LG54

(Removed by Forum Team)

Rubyroobs you haven't fully understood the situation, apologies if you thought you had.

Although there is around 80k equity in the flat, the lease will need extending in order to sell (potential cost of this, 30K), the capital gains tax as I understand it could be 20% (potential cost, up to 20K), the selling fees have a cost (potentially 4K) which leaves around 26K profit for me. There is also potentially loss of income from the flat being empty during the selling period.

Take into account the loss to my income in future of the rent for the property and the loss of tax credits, together with the increase in living costs, this 26K will not last for long when being used for living off.

So any profit does not therefore "supplement" my income, it IS my income for the time that it lasts. (Unfortunately, without having to defend my career choices, I work in a poorly paid sector, hence the need to look outside the box for earning extra income).

I currently have a little extra help from the government, but it is enough to just get by each month. Once I have nothing put aside, and my income is much reduced, I will be entitled to a lot of extra help from the government each month.

I hope that helps explain it clearer. Without going into figures, from my research I would expect the money I get from government to at least quadruple each month once the flat and small profit is gone.

LG54

peteuk said:

You are not being screwed, you dont currently fit the criteria for UC. The government will argue why should they support you when youve £80K of assets,  I understand the argument that this brings in income and benefits you in the future, equally if the rent covers the mortgage for the flat then selling it will not add to your disposable income.  The transition period helps. 

One question where are you currently living? Could you move into the flat?

You dont have to sell it, but obviously in 12 months you’ll loose your benefits, the situation with the COL/inflation may have changed by then. 
Could you look at support elsewhere, school breakfast clubs/wrap around childcare etc. 

Thank you for understanding the situation a bit better! 

The flat is a distance away and I am unable to move into it myself unfortunately, for other factors.

I work just under full time, but may need to find a second job and look at additional childcare. 

Spoonie_Turtle

LG54 said:

Realistically I will need to sell the flat to use the money to live, and then claim from UC once that money runs out.

Just to make sure you're aware, here, you can potentially claim once your savings drop to £16,000. 

Once you start nearing that (in the future after all this is done), do some benefit calculations based on your situation at that time and play around with different amounts of savings to find out when exactly you will qualify for help from UC again.

You will also then know exactly how much financial support to expect from UC, whether your quadrupling estimation is realistic or optimistic.

NedS

LG54 said:

(Removed by Forum Team)

Rubyroobs you haven't fully understood the situation, apologies if you thought you had.

Although there is around 80k equity in the flat, the lease will need extending in order to sell (potential cost of this, 30K), the capital gains tax as I understand it could be 20% (potential cost, up to 20K), the selling fees have a cost (potentially 4K) which leaves around 26K profit for me. There is also potentially loss of income from the flat being empty during the selling period.

Take into account the loss to my income in future of the rent for the property and the loss of tax credits, together with the increase in living costs, this 26K will not last for long when being used for living off.

So any profit does not therefore "supplement" my income, it IS my income for the time that it lasts. (Unfortunately, without having to defend my career choices, I work in a poorly paid sector, hence the need to look outside the box for earning extra income).

I currently have a little extra help from the government, but it is enough to just get by each month. Once I have nothing put aside, and my income is much reduced, I will be entitled to a lot of extra help from the government each month.

I hope that helps explain it clearer. Without going into figures, from my research I would expect the money I get from government to at least quadruple each month once the flat and small profit is gone.

Rather than seeing your hard work go down the pan and end up dependant on benefits, can you not look to increase your earnings to cover the "little extra help" you have been getting from the government and keep your investment?

Unfortunately the government would view it that if you are unable to manage without tax-payer support, why should the tax payer continue to support you to buy a property and benefit from that, which I think is a fair enough question, but I do take your point that without a little ongoing support now, you may end up needing a lot more support later.