Benefits post-paying off mortgage

edited 30 November -1 at 1:00AM in Benefits & Tax Credits
5 replies 1.5K views
TonyJFTonyJF Forumite
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edited 30 November -1 at 1:00AM in Benefits & Tax Credits
I am expecting to be made redundant later this year or early next year. I intend starting my own business afterwards. My initial thought was to pay off my mortage so that my homw is paid for should I run into financial difficulty.

However, I have read that, should my business fail and I have to live on jobseekers allowance and/or benefits once JSA is finished, thet mortgage pay off could be viewed us my having disposed of funds, and my claim being rejected.

Obviously I am hoping the business will work out, but I am looking beyond that. It seems logical to protect your home, but it seems if I do I may get punished later on.

Can anyone advise/clarify this situation? Is there a timescale - so if it all happened within 6 months would it be disallowed, but if it happened after 6 month allowed? The uncertainly worries me.

Thanks.

Replies

  • [Deleted User][Deleted User]
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    Fifth Anniversary 1,000 Posts Name Dropper I've been Money Tipped!
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    Most self employed can't claim JSA self employed class 3 N.I. cont only count towards your state pension
  • densol_2densol_2 Forumite
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    If you didnt pay the mortgage off - then surely you would have the capital in the bank ? Same thing, being over capital limit ?
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  • DarksparkleDarksparkle Forumite
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    venison wrote: »
    Most self employed can't claim JSA self employed class 3 N.I. cont only count towards your state pension

    Think you meant class 2 and 4 NIC. Class 3 nic is voluntary contributions.
  • TonyJFTonyJF Forumite
    9 Posts
    Fifth Anniversary First Post
    Thank you for you replies. Perhaps I should elaborate: first, I have been on special working condition for the oast 10 years as I have a medical condition...I work from home 2 days per week, when needed, and this, together with my absence record and my age tells me I won't be getting another job. That's the main reason for starting my own business. Plus, I would have paid NIC for about 40 years, so I don't imagine 6 months or so of being self-employed will prevent me getting JSA. The real clarification I'm looking for is, once I'm on income-based JSA, how far back into my accounts can they check, and again, would paying off my mortage count against me. It's one of the things people are advised to do...so what if you do so for genuine reasons and then find yourself unemployed? It seems overly harsh if, 6 months or a year later you are told you ought not to have paid it off.
  • pmlindyloopmlindyloo Forumite
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    TonyJF wrote: »
    Thank you for you replies. Perhaps I should elaborate: first, I have been on special working condition for the oast 10 years as I have a medical condition...I work from home 2 days per week, when needed, and this, together with my absence record and my age tells me I won't be getting another job. That's the main reason for starting my own business. Plus, I would have paid NIC for about 40 years, so I don't imagine 6 months or so of being self-employed will prevent me getting JSA. The real clarification I'm looking for is, once I'm on income-based JSA, how far back into my accounts can they check, and again, would paying off my mortage count against me. It's one of the things people are advised to do...so what if you do so for genuine reasons and then find yourself unemployed? It seems overly harsh if, 6 months or a year later you are told you ought not to have paid it off.

    The fact that you have paid class 1 NI contributions for the last 40 years is not taken into account for contribution based JSA. Eligibility is based on the previous two tax years.

    It is also relevant that if you had to claim benefits in the future then the claim may be for Universal Credit and not JSA.

    As regards paying off your mortgage or some of it, certainly under Universal Credit having done this would not be counted as Deprivation of capital.

    Advice for Decision Makers. Universal Credit

    H1796 People are not treated as having capital of which they have deprived themselves if
    1. it reduces or pays a debt owed by the person

    If you were claiming JSA then it might be queried but the overriding factor has to be that you paid off your mortgage in order to claim a means tested benefit or claim more benefit.

    Since you intend to start self employment then it could be argued that there was no intention of deprivation of capital.

    However, I am not a decision maker and so can't make that decision!

    It may help if you had a good business plan to show that there was a reasonable chance of success of your self employment succeeding.

    Or perhaps you should delay paying off your mortgage or just reducing the capital/overpaying from your savings until you are happy that your self employment is going to be successful. probably what I would do
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