Treatment of capital in housing benefit calculations

Capital and net weekly income, notional capital and the income a claimant does not have, and their impact on housing benefit calculation.

This content applies to England

HB calculation

The calculation of housing benefit is based on most financial resources the applicant has.

For details of the figures used to calculate housing benefit, see Benefit rates.

The local authority does not assess income and capital if the claimant is on income support, income-based jobseeker's allowance or pension credit (guarantee credit) (because such claimants qualify for maximum housing benefit). They are also not assessed by the authority if the claimant is on pension credit (savings credit) – because in this case the authority must generally use the Pension Service's assessment of income and capital in assessing housing benefit. A claimant who was paid one of these welfare benefits but was not entitled to it was not 'on' that benefit for the purposes of assessing their entitlement to housing benefit.[1]

HB capital thresholds

.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.[2]

A tariff income is assessed for claimants with savings above the 'lower capital limit'. The lower capital limit is:[3]

  • £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:[4]

  • 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.[5]

HB income taken into account

The following net weekly income is taken into account: wages, salaries, income from self-employment, most benefits, pensions, maintenance payments, and 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[6]

  • 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[7]

  • any payment of child benefit[8]

  • periodic compensation payments for personal injury can be disregarded, but may be taken into account as unearned income in certain circumstances[9]

  • payments made from certain charitable funds set up in the aftermath of serious incidents such as terrorist attacks[10]

  • compensation awarded under the Windrush Compensation Scheme (WCS)[11]

  • compensation awarded under the Grenfell Tower Payment and payments under the National Emergencies Trust[12]

If the income consists of earning 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.[13]

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

Notional capital and income

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:[14]

  • 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[15]

  • 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[16]

  • 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

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.[17] 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.

Last updated: 12 March 2021

Footnotes

  • [1]

    R (on the application of Prince) v Social Security Commissioner and (1) Secretary of State for Department for Work and Pensions (2) Southwark LBC (interested parties) [2009] EWHC 1181 (Admin).

  • [2]

    reg 43 Housing Benefit Regulations 2006 SI 2006/213; regs 26 and 43 Housing Benefit (Persons who have attained the qualifying age for pension credit) Regulations 2006 SI 2006/214.

  • [3]

    reg 52 Housing Benefit Regulations 2006 SI 2006/213; reg 29(2) Housing Benefit (Persons who have attained the qualifying age for pension credit) Regulations 2006 SI 2006/214.

  • [4]

    reg 52 Housing Benefit Regulations 2006 SI 2006/213; reg 29(2) Housing Benefit (Persons who have attained the qualifying age for pension credit) Regulations 2006 SI 2006/214.

  • [5]

    Sch.6 Housing Benefit Regulations 2006 SI 2006/213, as amended; Sch.6 Housing Benefit (Persons who have attained the qualifying age for pension credit) Regulations 2006 SI 2006/214, as amended; RM v Sefton Council (HB) [2016] UKUT 0357 (AAC).

  • [6]

    reg 40 and Sch.5 Housing Benefit Regulations 2006 SI 2006/213, as amended by Housing Benefit and Council Tax Benefit (Amendment) Regulations 2006 SI 2006/2813 and Personal Independence Payment (Supplementary Provisions and Consequential Amendments) Regulations 2013 SI 2013/388; reg 33 and Sch.5 Housing Benefit (Persons who have attained the qualifying age for pension credit) Regulations 2006 SI 2006/214), as amended by Housing Benefit and Council Tax Benefit (Amendment) Regulations 2006 SI 2006/2813 and Personal Independence Payment (Supplementary Provisions and Consequential Amendments) Regulations 2013 SI 2013/388.

  • [7]

    Sch.4 Housing Benefit Regulations 2006 SI 2006/213 as amended from 23 June 2017 by Employment and Support Allowance (Miscellaneous Amendments and Transitional and Savings Provision) Regulations 2017 (SI 2017/581); Sch.4 Housing Benefit (Persons who have attained the qualifying age for pension credit) Regulations 2006 SI 2006/214.

  • [8]

    Sch.5 Housing Benefit Regulations 2006 SI 2006/213, as amended by Housing Benefit and Council Tax Benefit (Child Benefit Disregard and Child Care Charges) Regulations 2009 SI 2009/1848.

  • [9]

    para 14(1) Sch.5 Housing Benefit Regulations 2006 SI 2006/213; reg 41(5) Housing Benefit Regulations 2006 SI 2006/213; LLoyd v Lewisham LBC [2013] EWCA Civ 923.

  • [10]

    Housing Benefit Regulations 2006 SI 2006/213 as amended by (among others) Social Security (Emergency Funds) (Amendment) Regulations 2017 SI 2017/689.

  • [11]

    DWP Guidance A8/2019 (Windrush Compensation Scheme and Housing Benefit).

  • [12]

    regs 5-6 Social Security (Income and Capital) (Miscellaneous Amendments) Regulations 2020/618.

  • [13]

    reg 29(3) Housing Benefit Regulations 2006 SI 2006/213; LB v (1) Lambeth LBC (2) Secretary of State for Work and Pensions (HB) [2015] UKUT 0237 (ACC).

  • [14]

    reg 49 Housing Benefit Regulations 2006 SI 2006/213.

  • [15]

    SH v Tower Hamlets LBC [2011] UKUT 96 (AAC); Commissioner's decision R(H) 1/06.

  • [16]

    para BW2.682 HB Guidance Manual.

  • [17]

    reg 50 Housing Benefit Regulations 2006 SI 2006/213.