Treatment of capital and income in housing benefit calculations

How housing benefit is calculated depends on whether the claimant is entitled to another means-tested benefit.

When a claimant is not entitled to another means-tested benefit, the local authority must assess their income and capital to work out their housing benefit entitlement.

Passport benefits

The local authority does not assess income and capital if the claimant is receiving:[1]

• income support

• income-based jobseeker's allowance

• income-related employment and support allowance

• universal credit

• guarantee credit of pension credit

These are often described as 'passport' benefits.

All passport benefits are administered by the DWP and are means-tested. The DWP assesses a claimant's income and capital when working out if they are entitled to any of the passport benefits. When a claimant is in receipt of a passport benefit they qualify for maximum housing benefit automatically.

The exception is if the housing benefit decision maker has strong and clear evidence that the claimant is fraudulently concealing income or capital from the DWP. In this case the decision maker can make their own assessment of the claimant's income or capital.[2]

The decision maker can suspend housing benefit if they have evidence about the claimant's income and capital which has not already been considered by a DWP decision maker and it raises doubt about whether the passport benefit should have been awarded.[3]

The local authority also does not need to assess income and capital when the claimant is in receipt of savings credit of pension credit. This is because the authority must generally use the Pension Service's assessment of income and capital in assessing housing benefit.

A claimant who has more than £16,000 in capital is not entitled to any housing benefit. This is known as the 'upper capital limit'. This limit does not apply to a claimant who is in receipt of the guarantee pension credit.[4]

A tariff income is assessed for claimants with savings above the 'lower capital limit'. The lower capital limit is:[5]

• £6,000 for a claimant of working age

• £10,000 for a claimant of pension credit age

• £10,000 a claimant of working who permanently lives in a care home

The tariff income means that the claimant has a weekly amount added to their income to take account of the notional income they receive from their capital.

Tariff income is calculated at the rate of £1 per week for:[6]

• each £250 (or part thereof) over £6,000 for claimants of working age (or £10,000 for those permanently resident in a care home)

• each £500 (or part thereof) over £10,000 for claimants of pension credit age

Capital includes cash, savings, shares, redundancy payments, and property (but not the value of the home the claimant lives in). Some kinds of capital are disregarded, such as arrears of benefit (up to £5,000) paid as a result of an error, money in personal injury trusts, insurance payments for loss or damage to the home, life insurance policies, business assets for the self-employed, payment of arrears or a concessionary payment made to compensate for arrears due to the non-payment of maternity allowance.[7]

The following net weekly income is taken into account:

• wages

• salaries

• income from self-employment

• most benefits

• pensions

• maintenance payments

• tariff income from capital.

Some income is disregarded, including:

• benefits such as disability living allowance, personal independence payment, attendance allowance and some other benefits relating to disability[8]

• childcare costs may be deducted where one member of a couple is in paid employment and the other is incapacitated, and where a child is disabled and under 16 years old.

• part of a person's earnings[9]

• any payment of child benefit[10]

• periodic compensation payments for personal injury can be disregarded, but may be taken into account as unearned income in certain circumstances[11]

• payments made from certain charitable funds set up in the aftermath of serious incidents such as terrorist attacks[12]

• compensation awarded under the Windrush Compensation Scheme (WCS)[13]

• compensation awarded under the Grenfell Tower Payment and payments under the National Emergencies Trust[14]

If the income consists of earnings from employment, which changes and fluctuates during the period of an award, the average weekly earnings must be calculated by reference to the claimant's likely earnings over such period.[15]

All income, including any that is to be disregarded, should be declared on the claim form.

A claimant has 'notional' capital or income where they do not actually possess capital or income but they are treated as if they do. This can occur when claimants:[16]

• deliberately deprive themselves of capital or income with the intention of qualifying for housing benefit. It is the claimant's intention and not what the money is spent on that is taken into account[17]

• fail to claim money that they are entitled to. The DWP advises that this should not normally apply to the claimant's failure to claim social security benefits[18]

• use money that has been paid to someone else to pay for certain basic items of expenditure such as food or fuel

• are paid less as a worker than the going rate and are not on a government training programme or DWP approved work placement. In this case the claimant's income is deemed to be the going rate subject to notional tax and national insurance deductions

• are not the sole owner or partner in a company, but their standing in the company is analogous to that of an owner or partner. In such cases the applicant's actual share in the company is disregarded, and is instead deemed to be the amount that would apply if they were the sole owner or partner

A student is treated as receiving a student loan if they have received the loan or could take reasonable steps to acquire the loan.[19] The Upper Tribunal has held the reasonable steps depend on the claimant's personal circumstances. For example, it is not reasonable to expect a devoutly religious person to apply for a loan when this is against their religious beliefs.[20]

Where a claimant has notional capital or income, it is assessed in the same way as actual capital or income.

Diminishing notional capital

Where a person is treated as having capital because they deliberately deprive themselves of funds in order to obtain housing benefit, the rule of 'diminishing notional capital' applies.[21] This means that the amount of notional capital is reduced by the amount that the claimant would have received in housing benefit had they not been treated as having that capital.