Universal Credit is a means-tested benefit, which means your income and capital are assessed to determine whether you are entitled to it and how much you receive. A common concern among homeowners who fall on hard times or whose income drops significantly is whether owning their home will prevent them from claiming. The good news is that the home you live in is generally disregarded as capital in the Universal Credit assessment, but other factors still apply.

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Your Main Home Is Disregarded as Capital

The property you live in as your main residence is disregarded as capital for Universal Credit purposes. This means that regardless of how much your home is worth, its value does not count toward the capital limits that would otherwise affect your entitlement. A homeowner with a property worth 400,000 pounds is not automatically excluded from Universal Credit solely on account of that property value.

The reasoning behind this disregard is that you cannot easily access the value in your home without either selling it or borrowing against it, and the policy aim is not to require people to sell their home before accessing support.

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The Capital Limits That Do Apply

While your home is disregarded, other capital, including savings, investments, and additional properties you own, is assessed. Universal Credit has a hard capital limit of 16,000 pounds. If your non-disregarded capital exceeds 16,000 pounds, you are not entitled to Universal Credit at all. Between 6,000 and 16,000 pounds of capital, a tariff income is assumed at the rate of 4.35 pounds per month for each 250 pounds of capital above 6,000 pounds, which reduces the Universal Credit award accordingly.

Capital below 6,000 pounds is fully disregarded and has no effect on the amount of Universal Credit you receive.

Second properties

If you own a second property in addition to your main home, that property's value is counted as capital. A second property worth 60,000 pounds would place you above the 16,000 pound capital limit and make you ineligible for Universal Credit until its value falls below that threshold through sale or a fall in market value.

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Income Assessment

Universal Credit is also affected by your income. Any earned income, self-employment income, and some other forms of income are assessed using a taper rate, where for every pound of net income you earn above a work allowance, your Universal Credit award reduces by 55 pence. If your income is high enough, it will reduce your Universal Credit to nil even if you would otherwise be entitled on capital grounds.

Unearned income such as rental income from a property you let out is also assessed and reduces the Universal Credit award accordingly.

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The Housing Cost Element

Universal Credit includes a housing cost element to help with rent or, in some cases, mortgage interest payments. Homeowners who qualify for Universal Credit and have a mortgage may be eligible for Support for Mortgage Interest, which is a government loan rather than a grant, used to help cover mortgage interest payments. The loan is secured against the property and repaid when the property is sold.

This is different from the housing cost element available to renters. Homeowners do not receive the rental housing cost element through Universal Credit.

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Mortgage Interest Support

Support for Mortgage Interest is available to those receiving Universal Credit who are also paying mortgage interest on their main home. There is a waiting period before it can be claimed, currently nine consecutive months of Universal Credit receipt. After the waiting period, the loan can be used to cover interest on mortgages and certain home improvement loans secured on the property, up to a maximum loan amount. The loan accrues interest at the Office for Budget Responsibility forecast rate and is registered as a second charge on the property.

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Summary

Owning your home does not prevent you from claiming Universal Credit. Your main residence is fully disregarded as capital. Your eligibility and award depend on your savings, other assets, income, and household circumstances. If your savings and other non-disregarded capital are below 16,000 pounds and your income is low enough, you may be entitled to Universal Credit even as a homeowner. Homeowners with a mortgage may also be eligible for Support for Mortgage Interest after a qualifying period.