UC Income > Capital Calculation
Hi all,
Still can't get my head around this one. I've read the wording many times - UC is counted as income unless there's any left at the end of the payment period after it was issued in - but struggling to put that into practical use. It does make sense on the 'forward' basis, if I only had UC paid into that account, and was moving any remaining UC into a different account on the first day of each payment period, but I want to calculate the amount of income 'backwards' from my overall total across all accounts.
So, for example, if I get £1500 UC. And spend £1000 of it on rent & bills. Do I disregard just £500 as being income (£1000 of the income having been spent during this period). Or do I disregard the full £1500 payment, despite having spent some of that income?
Closer to a real world scenario: October - £4000 already in savings. £1500 UC payment. £1000 spent. Leaves £4500 in accounts on the final day. But that can't equal £3000 savings (using the complete UC payment disregard) as that would be less capital than I started with! So it must equal £4500, with just the remaining unused £500 of UC disregarded?
But that means I will have to add up every outgoing of rent, bills and groceries during that payment period to deduct from the UC payment. Then only what's left can be considered income, to disregard from the overall total amount across the accounts.
Surely there must be an easier way to 'reverse' calculate disregarded income than that?
Comments
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As far as I can see looking at the Advice for Decision Makers re: UC, & something poppy has previously mentioned, income becomes capital if it has not been spent by the end of the assessment period after the one in which it was received. Please see H1050 below, the section 'When income becomes capital'
This would only become relevant if your savings were £6k or more (or become £6k or more). So, with your example if you had £4K savings (minus any CoL payments previously received which are disregarded indefinitely) & rec'd £1500 UC, if only £1k spent, this would mean your savings therefore increase by £500. I 'think' this is where you have concerns, as, if you don't spend all of your UC, then you may nudge yourself up to £6k or more in savings.
If you reach £6k or more, then your income (which includes a benefit) becomes capital on the last day of your assessment period, but would only be taken into account in the following assessment period if any amount of £6k or more remained unspent.
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Thanks @chiarieds
In hindsight, this wasn't the best example to use. I just thought it would make the maths a little easier. I do actually have over £6k across the accounts now. That's why the 'income' amount matters so much for this first calculation. I just can't work out whether my capital is over the £6k yet or not.
All I need to know is how much income there is in the accounts right now (or on any other day in the future). It sounds so simple in theory. But seems virtually impossible to actually calculate.
The fact that it's done by assessment periods rather than calendar months adds another layer of complexity as well, but just trying to understand the calculation before I move on to the specific dates.
To try another example (still not actual figures, just keeping to easy mental maths). If I've got £8k in accounts today. And disregard £1k for COL payments, that leaves £7k. Assume I got paid £1500 UC. That could initially all be disregarded, leaving £5500 capital - and no need to inform them. But if I've spent £1000 on rent and bills. Then only £500 of that UC is left, so that's all that can be disregarded. Meaning capital is £6500 and will need to inform them. But I can't see a way to do that without going through bank statements and adding up every outgoing during that payment period. I just feel like there must be a simple way that this can be calculated from the total figure but maybe I'm wrong and it really is that complex to calculate.
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Maybe I didn't explain that very well. All of your savings, etc are considered capital. With UC it only matters if your savings are £6k or more. If this happens then any amount of £6k or more that remains unspent, as in the scenario above, is deemed capital, & I quote, 'A person's capital is to be treated as yielding a monthly income of £4.35 for each £250 in excess of £6,000 and £4.35 for any excess which is not a complete £250.'
CoL payments, as mentioned as you know are disregarded, so you'd always subtract them when working out how much you have in savings.
So, with your example, £7k after deducting the disregarded CoL payments +£1500 UC = £8500 which you have on the last day of your assessment period. Then you spend £1k before the end of your next assessment period, which equals £7500, which is the amount that would be looked at (which you would need to report), & as if this £1500 over £6k was giving you 6 x £4.35 which equals £26.10 a month, which would be deducted from your UC. As your savings go up or down for £6k or more, this would then be adjusted. If they fall beneath £6k, there would be no deductions (unless you reach £6k or more in the future).
UC is 'income,' & it remains considered that so long as the total of your savings (all savings in bank, etc + UC) don't reach £6k or more. If they do, then this amount over is then instead deemed capital (which is treated as yielding a monthly income!)
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You are not alone in finding this confusing, many people feel the same way. To make it more simple the only way I can think of is that if your UC is £1,500/month and you spent £1,000 of that, you are left with £500 at the end of the following assessment period. This means that you would need to add £500 to your capital from the previous assessment period. If that's over £6,000 it would be that you will need to report.
If it makes it easier can you put your benefits payments into one account and your savings into another. Then at the end of the following assessment period, transfer the money that's left into the savings account so this way you'll know what's income and what's capital.
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also struggling to make sense of it all 🧐
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Thank you for the replies. 🙂
I think I get it now. I can't cut just the relevant parts of quotes so will be easier to just type the responses without quoting.
I've realised the wording about 'end of the next assessment period' makes it sound more complex than it is for the dates. Basically, as long as it's calculated on the final day of the assessment period, then the previous assessment period can be ignored completely, as all income left over from that one now counts as capital anyway.
Both Chiarieds and Poppy have confirmed what I thought about calculating the disregarded income from the current assessment period. That is the most complicated part. I just picked £1000 as an easy number for the maths, but in reality I will have to add up every single payment made during this period. So that's rent, water, electric, internet, TV licence, each grocery trip and every payment made online through ebay etc. Then subtract that amount from the UC payment in this period. Then what's left is the UC income that can be disregarded from the overall total across all accounts right now. There isn't an easier way to calculate that as far as I can see.
Poppy makes an interesting point about using two different accounts, and I may end up doing that. Previously I had ESA & HB going in to two different accounts which meant I could never accidentally use rent money on groceries for example. But now that they are lumped together in one payment for UC, that system no longer works effectively for me and I could change it.
Then there's the PIP income to disregard. Generally that should be easy to calculate as there will only be one PIP payment during each UC assessment period. So the most recent PIP can just be added to the most recent UC payment before subtracting the outgoings. However, with PIP being 4 weekly, that means one UC assessment period each year will include two PIP payments. Only one of those PIP payments can be counted as income during that UC assessment period.
So to try and sum it up as briefly as possible for anyone else in a similar situation:
- Find your UC assessment period dates and make a note of them.
- Calculate the capital on the final day of the assessment period.
- Add up all outgoings during this assessment period, between the dates you've noted.
- Add the most recent UC & PIP payments together. (*And any other benefits you may get that are counted as income)
- Subtract the total outgoings in number 3, from the total income in number 4. The figure left now is the income to disregard from the current assessment period.
- Add up the money you have in all accounts.
- Subtract the disregarded income figure in number 5, from the total account figure in number 6.
- Subtract any COL payments that you received from the capital total in number 7.
Now you are left with the exact amount of declarable capital that should be used to recalculate your UC entitlement figure. (Simple, right? 😅 )
Will also try to do a practical example using the same figures as before and a made up assessment period. Apologies for anyone that isn't good with maths.
- Assessment period 10th to 9th of this month
- Calculate on 9th
- £500 rent + £200 bills + £200 groceries + £100 on ebay = £1000 outgoings
- £1500 UC + £500 PIP = £2000 income
- £2000 (income) - £1000 (outgoings) = £1000 unused income to be disregarded
- £2500 current account + £5500 savings account = £8000 across all accounts
- £8000 (account total) - £1000 (disregarded income) = £7000 capital
- £7000 capital - £1000 COL payments = £6000 declarable capital.
I really hope I haven't made any typos in all that. Thanks again! 😃
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You remind me a lot of a client I had a few years ago. I admit I do not know your full situation but from what I have read I think it would be in your best interests to really find a way to increase your spending.
Would I be right to assume thhat there has been a time in your life that you had to live very frugally?
I would never advise someone to spend their capital wrecklessly, but your income is to spend how you wish. When accounting for any disregards, if your current capital is below £6000 it is in your best interest to increase your spending.
There must be areas of your life you could upgrade, even if you would not use or have need of the upgrades.
Make maximum contributions into a pension plan, whether you think you may need it or not.
Pay into a funeral plan, again regardless if you think you need it or not.
Treat family or people you care about. Pay their bills, order them shopping. Pay off their debt. Donate to charities. Donate to Go Fund Me's.
Sign up to laundry services, upgrade your phone package, sign up to TV , buy better quality household products, get high quality nutrition supplements, put some money towards yourself, your appearance, even if you do not care about it. Re-do your wardrobe, get new bedding. It does not matter if you feel you need the items or whether you think you will use them or are worth it. You are.
As for the capital, aside from the end of the second AP, you should not need to do any of that. Have your full capital in one bank account, at the end of the assessment period move anything left in your main account into the capital one, it is now capital. Do not over complicate it.
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I am in the same position that my capital is increasing as income is more than outgoings. My mental health worker has told me to increase spending but with mental health is difficult going out very often but I have been given advice on here and other forums on what is acceptable spending
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one thing I haven’t done when calculating capital is deduct CoL payments so I will include this now in my capital
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There are a few of us in this position. It has been posted about a few times on here before in the 5 years I've been a member. Sadly some people just don't understand how difficult it is to spend money in our position.
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yes then the worry of claim closing because of capital and then losing lcwra when reapplying
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If when reapplying I were to be given work commitments this would prove tricky as I’ve not worked in five years due to illness so there is a big gap in my cv that not many employers would consider especially with it being mental health illness
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@Emilee I did answer much of that in a previous thread, linked here.
Bank Statements — Scope | Online Community
Yes, I've always lived frugally. And although I was never in debt, I did only just manage on ESA & shared rate HB before getting PIP a few years later. I don't like to waste anything. I don't cope with change or a large amount of choice. I have no interest in TV packages or expensive clothes. Normal Freeview does me fine, as do jeans and a t-shirt. I can't use phones for calls/texts and can't adapt to a new handset so don't have a phone package. I can't cope with deliveries so can't really buy anything. I appreciate you're trying to help but I keep getting given the same 'advice' which assumes I have the ability to spend money easily when I don't. I wish I could still drive a car. I wish I could still eat more than toast & crackers. I wish I had a garden and more storage space. I wish I had some sort of social life. Unfortunately I don't have any of those things, so once my rent and bills are paid, there really isn't anything else I can spend money on.
I have started paying into a pension plan as I was previously advised to do. But there is still a considerable excess in my case and it will push my capital up every month until I lose UC altogether. As I said in the post above, although this is an uncommon situation, it's not totally unique.
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I am in exactly the same boat 😳 I have also been advised to pay into a pension but have no idea where to start with all that if you could give me some guidance ?
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Pensions are complicated and definitely not my area of expertise. But I can give you a basic idea just from my own experience. The type we are looking at is a private pension, often called a SIPP. This link explains a bit about them.
Best SIPP: Build a low cost DIY pension - MoneySavingExpert
There are quite a few different companies offering them - AJ Bell, Aviva, Vanguard & Hargreaves Lansdowne to name a few. They all have pros & cons. Some charge higher fees. Some make better gains. Some allow you to choose which things to invest in. Others do all the hard work for you, with someone else choosing the best way to invest the money. The long term idea is that the money in a pension increases above the rate of inflation, but of course no one can predict quite how to do that.
For UC Capital, anything in a pension pot gets disregarded because we cannot touch that money until reaching pension age. (Worth remembering that, if you do lose benefit income in future and still can't work, generally you won't be able to take the money out of a pension either.)
There is a limit on how much anyone can put into a pension each year based on their earnings. For those of us on benefits (very low earnings) that limit is £2880. That works out at £240 a month. But you can choose how much or how little to put into a pension each month. I have mine set up as a direct debit so I don't even have to think about it.
Hopefully that all makes sense as a starting point. If you can get some proper advice on which one would be best for you, that would be ideal. But it is still possible to setup yourself just using a phone or laptop. 🙂
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thank you for taking the time to go through that I will look into it 😊
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just wanted to check regards calculating capital that we deduct cost of living payments off of savings before declaring amount to UC
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Yes. If you have less than £6,000 after deducting those then you do not need to report anything.
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i myself would say as long as your total amount never went below the total of the col payments its ok if you do you have lost it
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bummer in my working life as a cowman i was known as 101% 🤣
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