What Can I Buy That Is Not Deprivation of Capital DWP?

Are you worried about spending money while claiming benefits? Many people on Universal Credit and other means-tested benefits are concerned about how their spending might affect their entitlements.

The Department for Work and Pensions (DWP) has strict rules on deprivation of capital, which means spending, giving away, or transferring money in a way that could reduce your eligibility for benefits.

But what can you buy without it being considered deprivation of capital? Understanding these rules can help you make financial decisions without risking your benefits.

In this guide, we’ll explore what purchases are allowed under DWP regulations, how capital is assessed, and what you need to know to avoid problems with your claim.

What Is Deprivation of Capital Under DWP?

Deprivation of capital occurs when an individual deliberately reduces or transfers their capital with the intention of qualifying for benefits they wouldn’t otherwise be eligible for.

Capital refers to savings, investments, property, lump-sum payments, and other financial assets.

By reducing their capital, claimants may appear to have lower financial resources, increasing their entitlement to benefits.

However, if the DWP suspects that capital has been deliberately spent or given away, they may still count it as if the claimant possesses it—this is known as notional capital.

How is Capital Assessed for Means-tested Benefits?

When you apply for benefits, the DWP considers both your own capital and your partner’s, but not the capital of dependent children.

• Capital under £6,000: No impact on means-tested benefits.
• £6,000 – £16,000: Benefits gradually reduce (every £250 of savings assumes £1 in income).
• Over £16,000: Claimants are generally ineligible for benefits.

For Pension Credit, the first £10,000 is ignored instead of £6,000. Beyond this, every £500 of savings is assumed to generate £1 in income, reducing benefits accordingly.

What Can I Buy Without It Being Considered Deprivation of Capital?

• When claiming benefits, it’s essential to know what expenses are considered reasonable and necessary to avoid suspicion of deprivation of capital.
• The DWP recognises that individuals will spend their money on living expenses, health, and quality of life improvements. Here’s a more detailed breakdown of acceptable purchases:

Can I Spend Money on Essential Living Expenses?

Basic living costs are always considered reasonable spending. These expenses include:

• Rent, mortgage payments, and council tax: If you are a homeowner, you can continue paying your mortgage. If you are renting, you can use your savings to cover rent payments.
• Utility bills: Gas, electricity, water, phone, internet, and home maintenance bills are all necessary expenses.
• Food and groceries: Buying food, toiletries, and other essential items for daily living is allowed.
• Clothing and footwear: Purchasing basic clothing is acceptable, but excessive spending on designer brands may raise concerns.

Can I Buy Household Items Without Affecting My Benefits?

You can use your money to maintain your home and living environment, which includes:

• Furniture: Buying or replacing a bed, sofa, dining table, or wardrobes is considered a necessity.
• Household appliances: Refrigerators, washing machines, cookers, kettles, and vacuum cleaners are essential for daily living.
• Home essentials: Bedding, curtains, and kitchenware (pots, pans, utensils) are allowed expenses.

However, spending excessively on luxury or high-end versions of these items could lead to DWP scrutiny.

Is It Okay to Spend Money on Personal and Medical Expenses?

The DWP allows spending on health and personal care, including:

• Medical treatments: If you require private healthcare not covered by the NHS, this is a justified expense.
• Dental care and optician costs: Paying for dental treatment, glasses, or contact lenses is acceptable.
• Mobility aids: If you need a wheelchair, stairlift, hearing aids, or other assistive devices, these are considered necessary purchases.

Can I Use My Savings for Leisure and Well-being?

Yes, you can spend money on activities that improve your quality of life, as long as the spending is reasonable:

• Gym memberships or fitness equipment: If used to maintain health and well-being, this is an acceptable purchase.
• Hobbies and educational courses: Enrolling in a course, buying books, or investing in hobbies like painting, knitting, or gardening is considered legitimate spending.
• Small holidays: Taking a short trip or budget-friendly holiday is allowed, but extravagant or frequent holidays may raise concerns.

Can I Spend Money on Home Repairs and Maintenance?

If you own a property, you can use your savings for:

• Essential home repairs: Fixing a leaking roof, repairing plumbing, or replacing a broken boiler is acceptable.
• General upkeep: Painting walls, fixing flooring, and replacing broken windows are considered necessary expenses.

However, remodelling a kitchen with luxury materials or adding high-end home improvements might be flagged as unnecessary.

Can I Pay for Legal and Professional Services?

You can spend your money on legal or financial matters, such as:

• Solicitor fees:  If you need legal assistance for making a will, handling divorce proceedings, or managing an estate, this is justified spending.
• Financial advice: If you hire a financial advisor to help manage your money, this is also considered reasonable.

As long as these purchases are necessary and justifiable, they will not be treated as deprivation of capital.

What Purchases Might Be Considered Deprivation of Capital?

If you spend or give away money without a justifiable reason, the DWP may investigate your financial transactions. They will check if your spending appears to be an attempt to lower your capital deliberately.

The following types of spending could be considered deprivation of capital:

Why Does the DWP Investigate Large Cash Gifts to Family or Friends?

Giving away large sums of money to relatives, friends, or charities without a clear reason could be seen as deliberately reducing capital.

Examples include:

• Gifting a large sum of money to a child or relative before applying for benefits.
• Paying off someone else’s debts (unless you are legally responsible for them).
• Donating a substantial amount to charity without evidence of a prior history of similar donations.

If the DWP suspects that these payments were made to artificially reduce your capital, they may still count the money as if you still had it.

Can Buying Luxury Items Affect My Benefits?

Yes, if your purchases seem excessive or unnecessary, they may be flagged.

Examples include:

• Buying an expensive car when a cheaper alternative would have sufficed.
• Purchasing luxury jewellery, designer clothing, or watches.
• Investing in expensive technology, like high-end computers or home entertainment systems.

While you are allowed to spend your money, purchasing extravagant or unnecessary luxury goods right before applying for benefits could be seen as deprivation of capital.

Does Overpaying Debts or Giving Away Property Count as Deprivation?

Yes, if you pay off debts faster than required or transfer assets below their market value, the DWP may investigate.

Examples include:

• Overpaying a mortgage or clearing personal loans early when minimum payments were sufficient.
• Selling a house, car, or valuable asset for less than market value.
• Giving away property or investments to relatives.

If you need to sell assets, it’s best to ensure they are sold at a fair market price and keep documentation to prove it.

Can Extravagant Holidays Be Seen as Deprivation of Capital?

Yes. While taking a holiday is generally allowed, the DWP may question:

• Frequent travel abroad (e.g., multiple long-haul holidays in one year).
• Luxury trips (e.g., first-class flights, five-star hotels).
• Unusual spending habits (e.g., suddenly booking a costly vacation before applying for benefits).

Can Putting Money Into a Trust or Business Count as Deprivation of Capital?

• Yes. If you transfer your savings or assets into a trust, business, or another person’s name without a clear purpose, it could be considered an attempt to hide your capital.

Can Investing in Non-essential Renovations Be Questioned?

Yes. If you spend excessively on home renovations without a necessary reason, the DWP may view this as an attempt to lower your savings.

• Luxury renovations (e.g., adding a home cinema or swimming pool).
• Expensive home upgrades (e.g., buying top-of-the-line furniture instead of basic replacements).

What Happens if the Dwp Suspects Deprivation of Capital?

If the DWP believes you deliberately reduced your capital, they may:

• Treat your benefits claim as if you still have the money.
• Reduce or cancel your benefits payments.
• Request evidence of how and why you spent your money.

To avoid this, keep detailed records, receipts, and justifications for major expenses.

Does Deprivation of Capital Affect Your Housing Benefit?

Yes, deprivation of capital can affect your housing benefit eligibility. The DWP and local councils assess claimants’ financial resources, including capital, when determining entitlement to Housing Benefit (for those who still qualify) or Universal Credit (Housing Element).

How Does Deprivation of Capital Impact Housing Benefit Calculations?

If the DWP or local authority believes that you have deliberately reduced your savings to qualify for benefits, they may apply notional capital rules. This means:

• Even if you no longer have the money, it may still be counted as if you do.
• Your housing benefit amount may be reduced or stopped entirely if your notional capital exceeds the upper limit.

Who Can Still Claim Housing Benefit in the UK?

Housing Benefit has largely been replaced by Universal Credit, but some groups can still claim it, including:

• People above state pension age (if they do not receive Universal Credit).
• Residents of supported, sheltered, or temporary housing.

What is the Capital Limit for Housing Benefit?

• Below £6,000: Your capital is disregarded, and your Housing Benefit remains unaffected.
• Between £6,000 and £16,000: Your benefits gradually reduce.
• Over £16,000: You are usually not eligible for Housing Benefit (unless receiving Guarantee Pension Credit).

What Spending is Allowed Without Affecting Housing Benefit?

You can spend your money on necessary expenses, such as:

• Rent, mortgage, and household bills.
• Essential repairs and home maintenance.
• Food, medical expenses, and daily living costs.

What Spending Might Affect Your Housing Benefit?

Spending that appears to artificially lower your savings before applying for benefits may raise red flags. Examples include:

• Giving away money to family or friends.
• Purchasing high-value luxury goods.
• Clearing debts earlier than required.
• Buying expensive property or cars without a clear need.

If the DWP suspects deprivation of capital, they may count your previous capital as if you still had it, which could reduce or eliminate your Housing Benefit.

Does Your Home Count as Part of Your Capital?

Yes, property is a form of capital, but the way it is assessed depends on individual circumstances.

When Does My Home Not Count as Capital?

• Your home is usually ignored in means-tested benefit calculations if you are living in it.
• However, if you own additional properties, the DWP may include them as part of your total capital.

When is Property Disregarded in a Benefits Claim?

Your home will not be counted as capital if it is occupied by:

• Your spouse, civil partner, or unmarried partner.
• A close relative aged 60 or over.
• A child under 16 (or under 20 in full-time education).
• A former spouse or partner who is a single parent.

This exclusion of property from capital calculations is known as property disregard.

What Happens if I Own Additional Properties?

• If you own a second home, it will count towards your capital and could impact your benefits.
• If you sell a property and keep the proceeds, that money will be counted as capital.
• If you sell a home and spend the money within reason, it may not count as deprivation of capital.

Can I Sell My Home and Still Receive Benefits?

Yes, but the proceeds from the sale may count as capital. If you plan to use the money to buy another property, the DWP may temporarily ignore it as capital if you can prove that you intend to reinvest it in housing.

How Can I Prove My Spending Is Legitimate?

If the DWP or local council questions your spending, you must provide evidence that your purchases were necessary and not an attempt to reduce your capital for benefits.

Why Should I Keep Financial Records?

Keeping detailed financial records helps you:

• Justify major expenses if questioned by the DWP.
• Avoid accusations of deprivation of capital.
• Show that spending aligns with reasonable living costs.

What Records Should I Keep?

It’s a good idea to keep receipts, invoices, and bank statements for:

• Essential expenses (rent, bills, groceries).
• Medical treatments and healthcare costs.
• Necessary home repairs and maintenance.
• Legal or financial advisory fees.
• Modest purchases to improve quality of life.

How Can I Explain My Spending to the DWP?

If the DWP investigates your spending, be prepared to:

• Provide receipts and transaction records: Show when and where you spent the money.
• Explain the necessity of the purchase: Describe why the spending was essential (e.g., replacing a broken boiler or paying for medical treatment).
• Show consistency in financial behaviour: Demonstrate that your spending pattern hasn’t drastically changed in a way that would suggest capital reduction.

What Happens if I Don’t Have Proof of Spending?

If you cannot provide adequate evidence, the DWP may assume that you have deliberately spent your capital to qualify for benefits. This could lead to:

• Reduced or stopped benefit payments.
• A request to repay benefits received.
• Legal consequences in extreme cases.

Common Mistakes to Avoid:

To prevent issues with the DWP:

• Avoid withdrawing large sums of cash without records.
• Keep a paper trail for all major transactions.
• Consult a financial advisor before making large purchases

Conclusion

Understanding deprivation of capital is essential for anyone receiving means-tested benefits like Universal Credit or Housing Benefit.

While you are allowed to spend your money on necessary living costs, healthcare, and home maintenance, giving away large sums, buying luxury items, or making questionable financial decisions could lead to the DWP treating your capital as if you still have it (notional capital), potentially reducing or stopping your benefits.

To avoid any issues:

• Spend responsibly on essential and reasonable expenses.
• Keep receipts and bank statements to justify major purchases.
• Seek financial advice if unsure about large transactions.

By following DWP guidelines and maintaining clear financial records, you can manage your savings wisely while ensuring your benefits remain unaffected.

FAQs on Deprivation of Capital and Acceptable Spending

Can I buy a car while claiming benefits?

Yes, if the car is necessary for daily use (e.g., for work or disability). However, purchasing an expensive luxury car may raise concerns.

Does giving money to family or charity count as deprivation of capital?

Yes, if the DWP believes you gave away money to reduce your savings and qualify for benefits, it could be treated as notional capital.

Will selling my house affect my benefits?

If you sell your home and keep the proceeds, that money will be counted as capital. However, if you intend to buy another home, the DWP may temporarily disregard the money.

Can I spend my savings on a holiday?

Yes, modest holidays are generally allowed. However, frequent or expensive trips could be seen as deprivation of capital.

How can I prove my spending is legitimate?

Keep receipts, bank statements, and invoices for all major expenses. Be prepared to explain why the spending was necessary if questioned by the DWP.