Valuation of equities in capital declaration

Altior

I have two queries around this, but as often seems to be the case, definitive info is not always easy to identify in the benefits space.

The first one is the XD. I'm planning to apply just after the XD on my equity holdings. Do dividends that you have qualified for, and have been reflected in the stock valuation need to get included in the capital declaration. For example if the payment date is a month after the application?

I've also read the law that states if there are selling costs, the valuation is reduced by 10%. Do you discount the value by 10% yourself in the declaration? And what if your platform doesn't actually have any selling costs (as per several modern day platforms).

Another related query I suppose, I will have cash accounts that have earned interest that is paid annually, that I have emptied before applying for UC. For example, a monthly £1000 RS after 7 months has £7K. I withdraw the £7K before the UC application, so the balance is nil. I've used the funds to pay debt off. However the accrued interest will only arrive in the account upon maturity, which is after the UC application date. You can't see the value of any accrued interest, it is only calculated upon maturity.

Thanks!

Yamor

What matters is the value of the shares when you make your claim (and then subsequently, if the change in value affects your benefit entitlement). If when you claim UC the shares are XD, then the value will be lower, and the stock valuation should be lower to reflect that the dividends will be paid to you and not any potential purchaser.

However, technically, the right to receive the dividends after the date the shares become XD will be a separate asset for you (as a 'chose in action'), and will also have a capital value. This will probably be slightly lower than what will be paid out (due to the time delay). In practice, UC are likely to be fine with you only including such dividends as capital when you actually receive them.

You can only deduct 10% if there will actually be expenses attributable to the sale. If there won't be expenses, nothing gets deducted.

As UC simply take into account the value you enter on the claim form for shares (unlike the procedure for property owners), my advice would be to simply enter the figure after any relevant 10% deduction. Alternatively, you could put the gross figure, and request on your journal for the 10% deduction to be applied.

Regarding the interest earned on a savings account, my comments above about the right to receive dividends applies here as well.

Altior

Many thanks Yamor. Yes that's right, excluding other factors, the dividend plus share value should be equal to the share value alone the day before the XD. So it should give me a little headroom if I don't include the value of the declared dividend.

These are quite marginal variables, but as I am going to be going for a relatively tiny amount of capital, just under the £6K threshold, I am operating at the margins. I need every pound I can cling on to!

From what I've read, if I declare less than £6K capital, I shouldn't expect to get a review for 6 months at least. But I want everything to be as accurate as it can be, anyway.

NedS

As @Yamor states, you should declare the value of the shares based on the current share price (less any relevant deductions for realising that capital). If the shares are ex-dividend, you should not include the dividend in your capital declaration until you actually receive it. At the moment, whist the shares are XD, it's simply a promise to pay you that amount. You do not have it (yet), so should not declare it. Once you receive the dividend, it immediately becomes capital for UC purposes.

If you are cutting things that close to the £6k threshold, surely receiving the dividend shortly after making your claim may take you over the threshold? Also, what happens when the share price rises 5% in an AP? You'd have to redeclare all capital (and have it verified again) if it takes you over the threshold.

I tend to hold volatile assets that I'm likely to hold for a long time such as shares in a SIPP so that they are disregarded for UC purposes to avoid such hassle. If you have £6k in assets for UC purposes, it's easier if those are fixed liquid assets earning a little income to offset inflation and can act as your emergency fund - you don't want to be selling shares after a large market drop to fix or replace a car or undertake emergency repairs on your home.

Altior

https://forums.moneysavingexpert.com/discussion/comment/81926870#Comment_81926870

I have a purchase CC on 0%, the deal still has a long time to run. My plan at this point is to pay it down to about £1K just before the application, and make a manual payment just before my AP end date, to bring the capital below £6K if/when necessary. Over and above the minimum.

I will put all my everyday spending on this card to begin with.

I do also have the back payment for the support group to play with for a few months. I think I will just use it as a safety instead of directly factoring it in, ie I will aim for actual £5999 capital as at application. Therefore I'll have a £600 odd buffer if I make a mistake.

The other options are mortgage overpayment before SMI kicks in, and ad hoc pension contributions.

Once SMI does kick in, I should (if my planning is correct), have significantly more income than outgoings. I can then start to pay down the CC, and overpay the mortgage. Though I'm sure that in practice, my plans will need to flex!

I will need to maintain a strong oversight over my affairs, but that's something that I enjoy doing.