Can I Claim Benefits if I Own a House Outright in the UK?

Did you know that owning property outright does not automatically disqualify you from claiming benefits in the UK?

While many believe that homeownership limits access to financial assistance, the truth is far more nuanced.

The UK benefits system considers a range of factors when assessing eligibility, including income, savings, and property ownership.

This blog will answer the crucial question: Can you claim benefits if you own a house outright in the UK?

We will explore the rules, exceptions, and the types of benefits that may still be available to homeowners, even those without a mortgage.

Can I Claim Benefits if I Own a House Outright in the UK?

Yes, you can claim benefits if you own a house outright, but eligibility depends on your personal and financial circumstances.

For means-tested benefits, like Universal Credit, your main home (the one you live in) is typically excluded from the capital assessment.

This means the value of your home does not count against the savings limit of £16,000 for benefits.

However, if you own additional properties, they are considered part of your capital assets, and their value could make you ineligible for means-tested benefits.

Example:

• If you own your main home outright and it’s worth £250,000, this does not disqualify you from Universal Credit.
• However, if you also own a second home worth £150,000, the second home’s value will be counted as capital unless it’s up for sale or exempt for other reasons.

What Are the Rules for Claiming Benefits if You Own a House in the UK?

The UK benefits system has specific rules for property owners. Here’s how they work:

• Main residence exclusion: Your primary residence is usually excluded from capital calculations.
• Income from property: If you rent out part of your property, that rental income will be counted when assessing eligibility for benefits.
• Additional properties: The value of any second homes or buy-to-let properties is treated as part of your capital.
• Savings and thresholds: Even if your property is excluded, you must still have less than £16,000 in savings to qualify for means-tested benefits like Universal Credit.

Non-Means-Tested Benefits

Some benefits are not based on your financial situation or property ownership. These include:

• Personal Independence Payment (PIP): Available for individuals with disabilities or long-term health conditions.
• Attendance Allowance: For individuals aged 65 and older who require care.
• Carer’s Allowance: For people caring for someone with substantial care needs.

How Do Capital Assets and Property Affect Benefit Eligibility?

Capital assets play a significant role in determining eligibility for means-tested benefits. These are the main factors:

What Counts as Capital Assets?

Capital assets include:

• Savings and cash.
• Stocks, shares, and other investments.
• The value of any properties you own (excluding your main home).

Savings Thresholds

If your total savings exceed £6,000, it will reduce the amount of benefits you’re entitled to. For example, Universal Credit uses a “tariff income” system, where every £250 over the £6,000 threshold reduces your monthly benefit amount.

Impact of Owning Multiple Properties

If you own a second home or rental property, its market value will count as part of your capital. The only exceptions are when the property is up for sale or is jointly owned and cannot be sold.

Example of Capital Limits:

• If you own your main home and have £5,000 in savings, you’re likely still eligible for means-tested benefits.
• If you own your main home and an additional property worth £100,000, this additional property will disqualify you unless special exemptions apply.

When Can Your Property Be Disregarded in a Benefits Claim?

There are specific scenarios where the value of your property is disregarded when assessing your eligibility for benefits. These include:

• Your Main Home: The home you live in is not counted as part of your capital when claiming means-tested benefits. This is the most common exemption, ensuring that property owners are not unfairly penalised.
• Temporary Absences: If you’re temporarily absent from your home (e.g., due to hospitalisation or providing care to someone else), the property is still disregarded. However, the absence should typically not exceed 6 months.
• Property Up for Sale: If you’ve put a second property up for sale, its value is disregarded during the period it is actively being marketed. Once sold, the proceeds are treated as capital.
• Joint Ownership Restrictions: If you jointly own a property with someone else and are unable to sell it due to legal or practical restrictions, its value may be disregarded.
• Domestic Abuse Survivors: If you’ve left a property due to domestic abuse, the property may be disregarded temporarily to ensure your safety.

These exemptions help prevent unfair disqualification from benefits and provide flexibility in specific situations.

Can You Get Support for Housing Costs as a Homeowner?

Homeowners in the UK cannot claim Housing Benefit, but they may be eligible for limited housing cost support under Universal Credit. This includes the following:

Service Charges

You may qualify for help with service charges if you live in a leasehold property. The support is available for expenses such as:

• Maintenance and repairs of shared areas.
• Rubbish collection and cleaning of communal spaces.
• Window cleaning for higher floors.

To qualify, you must:

• Be eligible for Universal Credit.
• Have lived in the property for at least 9 months.
• Not have income from employment, tax refunds, or statutory payments during the claim period.

Discretionary Housing Payments (DHP)

If you’re struggling to pay your housing-related costs, you can apply for DHP through your local council. This payment is designed to provide temporary financial assistance.

Support for Mortgage Interest (SMI)

Support for Mortgage Interest (SMI) is a government loan available to homeowners who have been on Universal Credit or another qualifying benefit for at least 3 months.

It helps cover interest payments on your mortgage or loans taken out for essential home repairs or improvements.

Key details of SMI

Eligibility:

• You must have been on Universal Credit, Income Support, or another qualifying benefit for 3 months without a break.

How It Works:

• SMI pays the interest on up to £200,000 of your mortgage or home improvement loan.
• Payments go directly to your lender, and the amount you receive is based on a set interest rate, not the rate you negotiated with your lender.

Repayment Terms:

SMI is a loan, not a grant. You’ll need to repay it with interest when you sell or transfer ownership of your home, unless the loan is moved to another property.

Why It’s Useful:

SMI prevents homeowners from falling into serious financial difficulty by covering a portion of their housing costs while they’re on benefits.

Are There Exceptions to Property Rules for Benefits Eligibility?

Certain exceptions apply to property ownership rules, which can help homeowners qualify for benefits even in complex situations:

• Domestic Abuse Survivors: If you’ve left your home due to domestic abuse, the property may be disregarded in your benefit assessment. This ensures that survivors are not financially disadvantaged.
• Pending Property Sales: When selling an additional property, its value is not counted as capital until the sale is completed. This gives you time to manage your finances without losing access to benefits.
• Second Homes for Specific Purposes: In some cases, a second home may be disregarded if it’s used for specific purposes, such as housing a dependent relative or if the property cannot be accessed due to legal disputes.
• Jointly Owned Properties: If a property is co-owned and cannot be sold due to ownership restrictions or lack of agreement with the co-owner, its value may not count as part of your capital.

These exceptions aim to provide flexibility for unique situations, ensuring that the benefits system is fair and accommodates individual circumstances.

What Can You Do if Your Property Affects Your Benefit Claim?

If the property you own impacts your eligibility for benefits, there are steps you can take to improve your situation while remaining compliant with the rules.

Depending on your circumstances, you may be able to sell a property, seek discretionary support, or explore specific exemptions. Here’s a breakdown of your options:

Selling Additional Properties to Qualify for Benefits

If you own multiple properties and their combined value pushes your capital above the £16,000 threshold for means-tested benefits, selling one of these properties could help you become eligible for benefits.

Key Considerations Before Selling:

• Eligibility Adjustments: Once the property is sold, the proceeds will count as capital unless you use the money for essential expenses or housing-related needs (e.g., paying off debts or purchasing a new home).
• Time Frames: The value of a property up for sale may be disregarded temporarily while it’s actively on the market. This allows you to apply for benefits even before the sale is finalised.
• Professional Advice: Selling a property is a significant financial decision that can have long-term implications. It’s crucial to consult with a financial advisor or legal expert to understand how the sale proceeds will affect your eligibility for benefits.

Example:

• If you own your primary home and a second property worth £100,000, the second home’s value will count against the £16,000 capital limit.
• Selling the second property and using the proceeds to pay off debts or buy another essential asset may reduce your capital to a level where you qualify for benefits.

Applying for Discretionary Housing Payments (DHP)

If you’re struggling to manage housing-related expenses, such as service charges or essential housing costs, you may be eligible for a Discretionary Housing Payment (DHP).

This is a temporary payment provided by your local council to assist individuals who face financial difficulty.

How DHP Works?

DHP is available for housing-related costs not covered by Universal Credit or other benefits.

It is typically used to help with short-term housing expenses, such as:

• Service charges.
• Ground rent.
• Preventing evictions.

Eligibility Criteria

• You must already be receiving Universal Credit or another qualifying benefit.
• The payment is awarded at the council’s discretion, and each application is reviewed on a case-by-case basis.

How to Apply?

• Contact your local council to request an application form.
• Provide evidence of your financial situation, including income, expenses, and details about your property.

Exploring Exemptions for Special Circumstances

If your property is affecting your benefits, check whether you qualify for any exemptions that could disregard its value. These exemptions can make a significant difference in your eligibility.

Common Exemptions Include

1. Pending Sale of a Property: If your additional property is up for sale, its value may be disregarded until the sale is completed. This gives you time to access benefits while transitioning your financial situation.
2. Jointly Owned Properties: If the property is co-owned with others and cannot be sold without their agreement, its value may not count toward your capital.
3. Domestic Abuse Cases: Survivors of domestic abuse who have left their property for safety reasons may have its value excluded from their assessment.

Example:

• You own a second property jointly with a sibling, but they refuse to sell. In this case, you can argue that the property cannot be liquidated, and its value should not be included in your capital calculation.

Considering a Support for Mortgage Interest (SMI) Loan

If you’re a homeowner with an outstanding mortgage and have been on Universal Credit (or another qualifying benefit) for at least three months, you may qualify for Support for Mortgage Interest (SMI).

What SMI Covers?

• SMI is a government loan that helps with the interest payments on your mortgage or loans taken out for home repairs and improvements.
• It can prevent you from defaulting on your mortgage and falling into financial hardship.

How It Helps If You’re Over the Capital Limit?

Although SMI doesn’t directly reduce your capital, it ensures that your housing costs are managed, preventing you from needing to sell your primary residence or falling behind on mortgage payments.

Using Proceeds from a Property Sale Effectively

If you sell a property and the proceeds put you over the capital limit, you can take steps to use this money effectively to reduce its impact on your benefits eligibility. For example:

• Paying off Debt: Use the proceeds to pay off existing debts, such as personal loans, credit card balances, or mortgage arrears.
• Investing in Essential Repairs: Invest the money into essential repairs or improvements for your primary home. This could include fixing a roof, upgrading central heating, or improving insulation.

Important Note:

Be cautious with how you spend the proceeds from a property sale. Spending the money in ways that the Department for Work and Pensions (DWP) considers frivolous could be seen as “deliberate deprivation of capital,” which may disqualify you from benefits.

Conclusion

Owning a property outright does not mean you’re automatically excluded from claiming benefits in the UK.

While rules around capital assets and property ownership can be complex, there are various exemptions, discretionary supports, and government schemes that can help you access financial assistance if you meet the criteria.

Whether it’s understanding how your primary residence is treated, exploring support for housing costs, or navigating exemptions for additional properties, there are ways to ensure you receive the help you’re entitled to.

If you need more detailed information about Universal Credit or any other UK benefits, visit Universal Credit News for expert advice, news, and guidance tailored to your situation.

FAQs

Can I get Universal Credit if I own my home outright?

Yes, provided you meet income and capital requirements.

Can I get help with service charges as a homeowner?

Yes, if you live in a leasehold property and meet the eligibility criteria.

What is Support for Mortgage Interest (SMI)?

SMI is a loan to help pay mortgage interest for homeowners on Universal Credit.

Does owning a second home disqualify me from benefits?

A second home’s value is counted as capital, which could make you ineligible.

Should I sell my property to qualify for benefits?

Selling a property may help reduce capital but requires careful consideration.