UC - Lump Sum as pseudo-Dividends (sale bonus) from previous employer

Piggulito

Newcad said:

Did you claim UC as a migration from Tax Credits, or for some other reason?

If it was a Managed Mifration from Tax Credits then did you have above £16k in capital.savings at migration?
(Your own not the business capital).

The answer to those can make a big difference to how savings of above £16k are treated in the first 12 months of UC.

PS. Whilst we do appreciate and respect the need for privacy we also do need details of circumstances to be able to give the right advice for those circumstances.
We are not being nosey; a question that is asked can have different 'right' answers depending on those other circumstances.

My UC claim started because I was on low income after I was dismissed from my previous company (the one that paid me the settlement and this new lump sum after more than 12 months) and opened a company. My company wasn't giving me enough to make a living. 
In any case, I am not worry about the capital savings, I thing the conversation is going a bit far from my initial question. 
The question is:
How should I efficiently declare the lump sum bonus extra payment I have just received in my personal bank account?

To consider:

1. I am self employed and at the same time on PAYE as Director of my tiny company.
2. I have passed the star-up period and  have not managed to earn the minimum income floor.
3. I have some losses from the self-employment that have been declared to UC on the monthly income and expenses from the self-emplyment declaration.
4. I do not receive any other work income at the moment.
5. My capital savings will be below £16k, i.e. no to be worried as I have commitments to pay now.
6. Currently looking for a job and leaving my entrepreneurial venture in a side (point 1 above).

 

Grumpy_chap

Piggulito said:

1. My capital savings will be below £16k, i.e. no to be worried as I have commitments to pay now.

Capital above £6k but below £16k will impact UC entitlement and needs to be declared.

peteuk

You've conveniently forgot the other question you asked.  Which was how do I reduce my take home pay.

So for simplicity here’s the questions and answers to both.

You previously left employment for which you were given £30K (you note this is tax free, as previously stated I now know nothing of this legislation so there for will not make comment. 

How much of that did you have at the point of applying for UC.?
If you had more than £16K you were not entitled to UC.  So therefore in theory at best youve been over paid at worst its fraud.
If you had more than £6K then this should have been declared, your UC will be reduced by £4.35 for every £250 over £6K or part of there in. 
Eg £6001 - reduced by £4.35, £6251 reduced by £8.70

At present you are expected further payment from your old employeer - this as noted is classed as capital and therefore should be declared on the last day of your UC assessment period. If it was classed as income (which as noted its not but for clarity and info I have added this)  then it should be declared as such and would attract the 55p per pound reduction to your UC in the first instance and then the following assessment period it would be come capital (what’s left of it).  The above info remains, above £16K then your no long entitled to UC, between £6K and £16K your UC wil be reduced by £4.35 for every £250 or part of there in….

You have to declare anything above £6K in capital (moneys, second homes, ISA, premium bonds etc etc.) 

Secondary to this youve set up as a director of a company, through which you receive PAYE wage, this the company will declare to DWP and for which your UC will be reduced by 55p per pound.  You also have a self employment wage which you will need to declare on the last day of your assessment period.  You can not roll over losses eg if you make £250 in September but have outgoings of £500, in October you make £250 again you cant then say that pays off the remaining £500 from September. 

Your question is two fold, you cant offset your lump sum with a loss from your current self employment.  Youve stated you have had a years start up and so the MIF applies, so there fore regardless of your take self employment income, the MIF will apply so your UC will be reduced by the MIF amount. 

To be perfectly honest, it sounds to me like you are trying to play the system, and you’re about to be caught out. Thats not a negative comment, thats just my way of saying youve set things up in a complicated way, it may not have been intentional or it may be youve seen something simular.   From what youve posted there is enough for me to question where’s the £30K at the start of your UC.

I say this because at the start of your UC as you are self employed you would have been given a start up period, you have stated this is over, which means your UC claim started before October 2023.  Eg youve had a years worth of UC.  To a point your PAYE and self employment has worked, but now your expecting another pay out (it would be good to know how much - so that the advice can be directed to that).

Simply put if the amount received is over £16K you are no longer entitled to UC - you can spend this in a way to get it below £16K but be careful, because although you may think its ok, the whole ethos of DoC is are you spending money to remain eligible to claim UC.

For instance paying of credit card debt, mortgage ect is acceptable.  Buying a new car, because your 2001 Ford Escort only scrapped though its last MOT and you know to get it through this years is going to cost ££££, So if you go buy a nice car, no problem but if you go top of the range Range Rover with all the extra then  the question will be asked as you dont live on a farm and dont drive on anything other than roads, do you really need the top spec Range Rover etc etc. this may be seen as DoC.

Piggulito

Dear @peteuk thank you for following up despite you are assuming many wrong things.
I did spend most of those £30k in paying debts, changing my car that was not passing the MOT (for a 14 years old car not for a Range Rover my dear) , investing in my company and paying my rent, bill and family expanses during 6 months. 
Then I realised that I could not afford paying my rent, so applied to UC with a bit more than £6k in my savings account. All fully declared with bank statements, appointments almost every week, etc. 
Again insisting in the Capital Savings declaration that I already know by heart, the " reduced by £4.35 for every £250 ".
I believe my initial question has already been answered, I need to declare this extra bonus lump sum (less than £10k) as an income and if I am above £16k on Capital Savings I should stop my UC claim, I know, I know.

I guess my UC will be stopped because of that lump sum. 

thank you

Spoonie_Turtle

There is guidance about what is deemed income for UC.  Chapters H3 - H5 deal with this
https://www.gov.uk/government/publications/advice-for-decision-making-staff-guide

I've lost track so I don't know whether the company giving you this latest lump sum means it's self-employed or employed, or even 'unearned'.

If it doesn't fit into any of the 'income' categories then it'll be deemed as capital.

If it is income, you'll likely end up with zero UC for a month or few, depending on surplus earnings (again dependent upon whether it's classed as earned or unearned).  But your UC claim will not close until/unless you have six consecutive months of nil UC due to earnings.

peteuk

I dont think I assumed anything, I was showing what could be achieved or what could happen. But explained in full due to the lack of clear info in the first place. 

Please remember this is a public forum, so although general advice is provided for the OP. I have explained things in full for those who might read your thread as they are in a similar position.  Equally there is no indication of you knowledge of the UC process, so its great you are already aware of the £4.35 deduction, but potentially others aren’t.  

Buying a car is one of the easiest ways to explain DoC.  I used the Range Rover Top spec as an example, a Porsche would easily also explain DoC. 

Glad youve got the answers.