Does selling your house affect your Universal Credit in 2024?

You’ve decided to sell your home, you need the money and a move is necessary. But the implications for your benefits are unknown.

Universal Credit is your main source of income and you need to know what happens when that money from your property comes in. Will the house sale mean you are no longer entitled to Universal Credit? 

The most important thing to know about Universal Credit and a house sale is that it is not necessarily about the actual sale of the house, which may not impact your claim, but instead, the resulting funds will be the thing that changes your Universal Credit status.

This guide explains how the money you receive (capital) can impact your eligibility and entitlement.

Universal credit & property ownership at a glance

Universal credit is a social security benefit that supports individuals and families with low incomes or those out of work. While the sale of your house itself doesn’t affect your claim, the resulting capital can. 

Here are the Universal Credit & property ownership rules at a glance:

• Selling your house itself doesn't affect your claim.

• The money from the sale (capital) is considered for UC eligibility.

• Capital below £6,000 has no impact on UC payments.

• Capital between £6,000 and £16,000 may reduce your UC amount.

• Capital exceeding £16,000 can make you ineligible for UC.

• There's a 26-week grace period when buying another home, where the sale proceeds might not count towards your capital limit.

Here’s what you need to do:

• Inform the DWP about any changes in your circumstances, including house sales.

• If you plan to buy another home, provide details to the DWP to minimise impact on UC.

• Consider seeking advice from a benefits advisor or the DWP for personalised guidance,

Universal credit considers your capital (savings, investments and the sale of property) when determining your eligibility and entitlement. You must have less than £16,000 in capital to claim. If you don’t buy another residence, the capital may affect your benefits for a while. 

If you sell your house and start renting, you might be eligible for additional housing support in your universal credit. If you own and live in your home, selling it may affect the housing cost element of your Universal Credit, which considers mortgage payments. 

If you sell your house, you usually have a 26 week grace period to buy another primary residence. During this time, the money from the sale may not count towards our capital limit for Universal Credit. However, any money left over after this period will be considered as savings by the DWP and may affect your benefits. 

Do you need to inform the DWP if you sell your house?

Yes, you will need to inform the Department for Work and Pensions about any changes in your circumstances, including selling a property. This ensures you receive the correct amount of Universal Credit and avoids potential overpayment or underpayment issues.

Does property count as savings for Universal Credit?

When considering Universal Credit (UC) eligibility and the impact of property ownership, it's essential to differentiate between various types of assets and their treatment under UC rules. Property, in the context of the home you live in, does not count as savings or capital for UC purposes. 

This distinction ensures that individuals are not penalised for owning their primary residence, aligning with the broader objective of UC to support those with lower income or out of work, without forcing them to sell their home to qualify.

However, the scenario changes when a property is sold. The proceeds from the sale of a property are considered capital, which could affect your UC. 

Capital, for UC purposes, encompasses a wide range of assets, including money from property sales. This capital is treated similarly to savings, meaning that large sums received from selling a property can impact UC eligibility and payments.

The Department for Work and Pensions (DWP), which administers UC, has specific thresholds for capital and savings. If an individual's total capital is below £6,000, their UC payments are not affected. Capital between £6,000 and £16,000 may reduce the amount of UC received, on a sliding scale. 

Importantly, if your capital exceeds £16,000, you become ineligible for UC altogether. This policy is designed to ensure that UC support is targeted at those who most need financial assistance, under the assumption that individuals with significant savings or capital can support themselves.

It's worth noting that there are some nuances and exceptions to these general rules, especially regarding the intention to purchase another home with the proceeds of a sale. For a period, money intended for the purchase of a new primary residence may not count towards the capital limit. This period allows individuals to transition between homes without losing their UC eligibility.

In summary, while the property you live in is not considered capital or savings for UC, the proceeds from selling such a property are. This distinction underscores the balance UC tries to strike between providing support to those in need and ensuring that assistance is not extended to those with substantial assets. 

Anyone navigating these rules should consider seeking advice from a benefits advisor or the DWP to understand their specific situation and how best to plan and manage their assets and benefits.

How does property affect Universal Credit?

It is important to understand Universal Credit when thinking about property, as if you are aiming to buy or sell in the not too distant future but are receiving Universal Credit support, your situation may change. 

In short, Universal Credit is a social security benefit in the United Kingdom designed to support individuals and families on low incomes or who are out of work or earning low wages.  

Universal Credit is available to people in and out of work, including those on low incomes and eligibility is based on factors such as income, savings, living situation, and health or disability status. 

 You can apply for Universal Credit online on the official government website. The application process involves providing extensive information about your income, living arrangements, and other relevant details that could impact your financial and professional life. 

Universal Credit is usually paid monthly, and the amount is calculated based on your income, housing costs, and other circumstances, hence why your house sale could do your income some damage. The payment is made into a bank account, and it is your responsibility to budget for your living expenses, there are no explicit requirements of what you do with this money. 

Equally, if you stop living in a house you own and begin renting instead, this can have an impact. If you rent your home, you may receive an additional amount to help with housing expenses which will impact your standard allowance monthly.

Can you buy a house while on Universal Credit?

Yes, you can still buy a house while receiving Universal Credit, but you will need to consider your eligibility. Universal Credit itself doesn’t directly impact your eligibility to buy a house. Mortgage lenders, however, have their own criteria for approving mortgages and they may consider your income from Universal Credit as part of their assessment.

Having a stable income source and a good credit history are important regardless of whether you receive Universal Credit. While receiving Universal Credit, you may still be eligible for the housing element to help with renting accommodation.

What are the challenges of buying a house while on Universal Credit?

Buying a house may affect your Universal Credit payments due to the increase in capital (property value). Here are some of the key challenges that people buying a house while on Universal Credit face:

How can you buy a house while on Universal Credit?

Having a larger deposit reduces the loan amount needed and can make you a more attractive borrower for lenders. But, if this is unachievable, you could consider options like shared ownership or help to buy schemes that may offer more flexibility with lower deposits.

In order to buy a house while on universal credit, your will need to:

I plan to use the money from the sale to buy another house. Will that affect my UC?

If you buy another primary residence within a reasonable period (typically 26 weeks), the money used for the purchase might not count towards your capital limit, minimising the impact on your UC.

Grace Period:

• The DWP generally offers a 26-week grace period to use the proceeds from selling your house to purchase another primary residence.

• During this period, the money from the sale may not be counted towards your capital limit for determining your UC eligibility and payment amount.

Key Points:

• This grace period allows you to transition between homes without significant disruption to your UC.

• It aims to ensure that individuals are not penalised for selling their current home and using the funds for another primary residence.

Important Considerations:

• Clarity on "Primary Residence": Ensure the new property you purchase qualifies as your primary residence. This typically means it's your main home address where you live and intend to stay.

• Timeframe: The grace period is not a guaranteed timeframe, and it's crucial to complete the purchase within 26 weeks to benefit from this exemption. Delays beyond this period could result in the sale proceeds being counted as capital, potentially affecting your UC.

• Documentation: Be prepared to provide evidence to the DWP about your intention to purchase another primary residence. This might include details like the purchase agreement, sale completion date, and new property address.

Minimising Impact:

• By utilising the grace period effectively and completing the purchase within the timeframe, you can minimise the impact of selling your house on your Universal Credit.

• It's essential to stay informed about the latest regulations and seek professional advice from a benefits advisor or the DWP if you have any uncertainties or require personalised guidance based on your specific circumstances.

Can you flip houses while on Universal Credit?

While receiving Universal Credit, flipping houses is technically possible but it’s important to understand the potential impact on your eligibility and benefits. Universal Credit is not intended for investment purposes and is primarily designed to support people on lower incomes or out of work. It is meant to support basic living costs, not investment ventures. 

Any income generated from flipping houses, including profits from flipping houses, must be reported to the DWP to avoid overpayments and penalties. If you renovate and sell a house, the profits may affect your eligibility as profits exceeding £16,000 will make you ineligible for Universal Credit.

But, the impact of flipping houses on your Universal Credit will depend on how much profit you are making, how often you are flipping - as frequent flipping can indicate self-employment and if flipping houses becomes your primary business activity, the impact on your benefits is far greater than treating it as a one-time event. 

What happens if you become ileligible for Universal Credit?

Losing Universal Credit can be a stressful experience, but understanding the potential consequences and available options can help you navigate the situation. Here’s a breakdown of what to expect and what steps you can take:

1. Notification and Payment Cessation:

• The Department for Work and Pensions (DWP) will notify you of your ineligibility and stop your payments.

• They will explain the reason for your ineligibility and provide details on the decision-making process.

2. Overpayment Recovery:

• If you failed to report changes that affected your eligibility and received overpayments, the DWP may require repayment.

• They offer various recovery options, such as deductions from future benefits or direct billing.

3. Challenging the Decision:

• Disagree with the decision? You have the right to request a mandatory reconsideration, followed by an appeal to an independent tribunal if the reconsideration is unsuccessful.

• Follow the DWP process and consider seeking legal or charity advice specialising in benefits.

4. Seeking Alternative Support:

• Explore other benefits you might be eligible for, like Jobseeker's Allowance (unemployment), Employment and Support Allowance (disability/illness), or others based on your circumstances.

5. Financial Support and Planning:

• Losing Universal Credit can be financially challenging. Consider seeking financial advice or support from charities or non-profit organisations.

• They can offer guidance on:

  • Managing your finances

  • Reducing expenses

  • Accessing emergency funds or food banks if needed

6. Employment and Training:

• If income changes caused your ineligibility (e.g., finding work), continue seeking career advancement or training opportunities.

• This can help stabilise your finances and potentially increase your income in the long run.

Is flipping houses a good alternative to being on Universal Credit?

Flipping houses, while potentially lucrative for some, isn’t a direct alternative to the steady support of Universal Credit. While Universal Credit helps meet basic needs, house flipping offers the possibility of significant financial gains that could surpass benefits received, but comes with substantial risks and requirements.

House flipping requires significant upfront investment covering purchase, renovation (or the skills to do it yourself), permits, legal fees and project management - a major hurdle for someone relying on Universal Credit.

The housing market’s unpredictability adds another layer of risk. While potential returns are high, economic downturns, unexpected costs, or selling difficulties can lead to financial losses. Managing the risk requires a solid strategy and a financial cushion to absorb potential losses. 

Furthermore, successful flipping often demands a combination of market knowledge, renovation skills and project and budget management expertise. Lacking this expertise can significantly impact profitability. 

Additionally, flipping houses is time consuming, often resembling a full-time job, especially with hands-on renovations or managing multiple properties. Remember, any profits are subject to taxation, so understanding HMRC implications is crucial.

While flipping houses might appear attractive for achieving financial freedom, especially for those on Universal Credit, it’s not a guaranteed or regular income source. It’s best viewed as an investment strategy, not a direct replacement for the consistent support offered by benefits.

Should I sell my house while on Universal Credit?

When you sell your home, you gain money, or capital and therefore your house sale will impact your credit for a while. 

The amount of capital you have can affect your eligibility for Universal Credit. There are capital limits, and if your total capital exceeds these limits, it may impact your entitlement to Universal Credit. 

But, if you use the proceeds from the house sale to buy a new home, the impact on your Universal Credit may be limited. The value of the new property and how you use the funds will be taken into account, so be sure to give as much information as possible to the DWP when organising changes in your income and capital. 

If you own a home and are living in it, the housing costs element of Universal Credit may be affected by mortgage interest payments or other housing-related expenses, therefore how those changes too will also create changes. 

The value of the property and how you use the proceeds can be considered as part of your overall financial situation, thus impacting the £300 plus a month you may be eligible for if you are single and over 25. 

To claim Universal Credit you must not have savings of over £16,000, and you shouldn’t be earning enough to be able to cover things like bills and housing regularly. 

Therefore, a sudden influx of cash from a house sale can have implications for your credit-claiming situation. 

It's advisable to promptly inform the Department for Work and Pensions (DWP) about any changes in your circumstances including the sale of a house. Failing to report changes may result in overpayment or underpayment of benefits which could leave you with less cash in a given period. 

How much does selling my house affect my Universal Credit?

The amount of capital you have (including the proceeds from selling your house) can affect your eligibility for Universal Credit and the amount you receive. There are capital limits and if your total capital exceeds these limits, it may impact your entitlement. 

Beyond the proceeds from house sales, various factors constitute capital and savings for Universal Credit (UC) purposes:

• Inheritance: Money received from inheritance is considered capital and can affect your UC eligibility.

• Large gifts: Gifts exceeding £1,000 in a single instance or £2,500 over 12 months are counted as capital.

• Other property sales: Selling other assets like land or vehicles also generates capital impacting your UC claim.

Selling your house can affect different components of your UC payment:

• Housing Element: If you sell your house and stop claiming the housing element, you may be eligible for housing benefit in your rental situation. However, the proceeds from the sale could impact your entitlement.

• Childcare Costs: If you use the money from the sale to pay for childcare, it might not directly affect your UC entitlement. However, the total capital needs to be declared, and its impact on your overall UC award needs to be assessed.

Example 1: 

You sell your house for £150,000 with no other capital and use the entire amount to buy a new home within 26 weeks. Your UC payments are unlikely to be affected as the capital is used for purchasing another primary residence.

Example 2: 

You sell your house for £200,000, have £5,000 savings, and use only £100,000 to buy a new home. Your combined capital (£105,000) exceeds the £16,000 limit, potentially reducing your UC for a period.

Can cash house buyers be helpful for people on Universal Credit selling their house?

Selling to a cash house buyer could help someone on Universal Credit sell their house faster with less hassle compared to traditional house sale methods like estate agents. Cash buyers usually operate on a fast service approach, completing within weeks if not days and can be vital for individuals on Universal Credit needing to access funds quickly. 

As cash buyers are not reliant on mortgage approval, the risk of a sale falling through due to financing issues is reduced. The faster sale and lack of contingencies can significantly reduce the stress associated with selling a house. 

If you are looking for a tried and tested cash buying solution, why not sell to us? We are a leading UK cash buyer with over 100 years of combined experience in buying and selling houses. 

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