Universal Credit and second property

Hello! I am Gemma, a friendly legal assistant at Lawyer Destroyer. I would be happy to help you understand how owning another property affects your eligibility for Universal Credit.

The short answer is that owning a second property can stop you from getting Universal Credit, but it all comes down to the financial value of the property and your reasons for owning it.

Universal Credit is a means-tested benefit:

This means the Department for Work and Pensions looks at what you earn and what you own to decide if you need financial help. The things you own are called your capital, which includes savings, investments, and property.

The capital limit for Universal Credit is £16,000. If the total value of your savings and capital is over this amount, you cannot get Universal Credit. If your total capital is between £6,000 and £16,000, you can still get Universal Credit, but your payments will be reduced. Anything you have under £6,000 is ignored completely.

How properties are counted:

The home you actually live in as your main residence is completely ignored. It does not matter how much it is worth.

However, any other property you own in the UK or abroad will usually count towards your capital limit. To work out the capital value of that second property, the Department for Work and Pensions will look at its current market value. They will then deduct any mortgage or debts secured on it, and they will usually take off 10 percent of the value to cover the hypothetical costs of selling it.

If that remaining amount, added together with any other savings you have, pushes you over the £16,000 limit, you will normally not be eligible for Universal Credit.

Exceptions to the rule:

There are some important situations where the Department for Work and Pensions will temporarily or permanently ignore your second property. If one of these applies to you, the property will not count towards your £16,000 limit.

A second property is usually ignored if:

1. You are actively taking steps to sell the property. This is usually ignored for up to six months, though it can sometimes be extended if the sale takes longer for reasons outside your control.
2. A close relative lives in the property, and they have either reached Pension Credit age or are incapacitated.
3. Your former partner lives in the property and they are a lone parent.
4. You recently moved out of the property because of a relationship breakdown. In this case, the property is usually ignored for up to six months.
5. You have acquired the property and are taking steps to carry out essential repairs or alterations so you can move into it. This is usually ignored for up to six months.

Practical next steps:

1. Estimate the value. Work out the rough market value of the second property, minus any mortgage and 10 percent for selling costs. Add this to your other bank balances and savings to see if you are actually over £16,000.
2. Check the exceptions. Carefully consider if any of the situations above apply to you right now.
3. Gather your evidence. If an exception does apply, get your proof together. For example, if you are selling the property, find your contract with the estate agent or letters from your solicitor.
4. Be clear in your application. You must always declare a second property when you apply for Universal Credit, even if it has no equity in it or an exception applies. When you apply, or in your online journal, clearly explain your situation and provide your evidence so the decision maker can treat the property correctly.

Please let me know if you would like to talk about a specific exception or if there are more details about the property you would like to explore.