Universal credit rules

Intel1982

Hi there,

We have recently started claiming universal credit for the first time this year and I'm still worried that we break the rules!

1. We overpay our mortgage, is this allowed?
2. We are planning to move and buy a bigger house, is this allowed provided all proceeds of the sale go into the new mortgage?
3. We pay additional pension contributions into my husband's pension - is there a limit to how much we can contribute? 
4. I don't work as I care for my son, but would I be allowed to open a SIPP? I currently have no pension provision at all. 
4. If we buy any big purchases, such as a car or get a new kitchen for instance, does this all need to be declared and receipts etc provided?

Thanks in advance. 

Spoonie_Turtle

Intel1982 said:

Hi there,

We have recently started claiming universal credit for the first time this year and I'm still worried that we break the rules!

1. We overpay our mortgage, is this allowed?
2. We are planning to move and buy a bigger house, is this allowed provided all proceeds of the sale go into the new mortgage?
3. We pay additional pension contributions into my husband's pension - is there a limit to how much we can contribute? 
4. I don't work as I care for my son, but would I be allowed to open a SIPP? I currently have no pension provision at all. 
4. If we buy any big purchases, such as a car or get a new kitchen for instance, does this all need to be declared and receipts etc provided?

Thanks in advance. 

1. Yes, it's up to you what you do with your money.  It won't affect your UC.

2. Yes, although you are allowed up to £16,000 of savings on UC so you don't have to put *everything* into the new house.

3. I believe the limit is effectively what you earn - no limit set by UC, just realistically for how pensions and tax relief work (would need more knowledgeable members to confirm).

4. I believe so but it won't affect what UC you get, it'll just be you choosing to do that with some of your overall income each month.

5. If your savings are between £6,000 and £16,000 then yes.  If below £6,000 then they don't affect your UC so you don't need to tell them.  The Decision Maker will decide whether the expenditure was reasonable and thus whether to treat you as if you still have what you spent or not, if they decide it wasn't reasonable and a main factor was to increase your UC entitlement by reducing savings.  This is known as Deprivation of Capital but unless your savings were treated as having gone over £16,000 then you'd still be able to continue your UC claim, just with the proportional deduction for those savings still.


N.B. Points 2 and 5 will have slightly different advice if you've claimed UC via Managed Migration from e.g. Tax Credits and already have over £16,000 in savings.

justwhat

3. no Pension limit at all for UC , However you will only get the tax incentive  on a certain amount.
4. Yes that's fine ,However, you'll only receive tax relief on contributions of up to £2,880 every year as you are not working.

Intel1982

justwhat said:

3. no Pension limit at all for UC , However you will only get the tax incentive  on a certain amount.
4. Yes that's fine ,However, you'll only receive tax relief on contributions of up to £2,880 every year as you are not working.

What happens with the tax? In previous years we have done a self assessment to pay back some child benefit but now don't think we need to do this due to the changes. If we do get a rebate that would knock off our eligibility for universal credit? Thanks! 

sheramber

You do not get a rebate. The tax relief is paid onto your pension by the pension company.

Intel1982

Thank you for your help everyone!

NedS

justwhat said:

3. no Pension limit at all for UC , However you will only get the tax incentive  on a certain amount.

That's not technically correct - the legislation says "all relievable contributions", so the limit is set at the maximum amount that a person can receive tax relief upon. These limits are set by HMRC (not UC), and are generally no more than you earn or a maximum annual limit of £60k gross.

That effectively means a person can pay their entire salary into a pension as long as their gross contributions do not exceed £60k.

Yamor

Actually, the Regs refer to "relievable pension contributions", which is defined by reference to s.188 of the Finance Act 2004, and this is NOT limited to earnings or £60k.

Intel1982

Thanks guys, wouldn't be able to pay in anything near that amount so shouldn't be a worry 🙂