Universal Credit Capital Limits for Kinship Carers

Kinship carers on Universal Credit are often blindsided by capital rules — particularly when a lump-sum SGO allowance or a backdated Child Benefit payment pushes their savings over a threshold they did not know existed. The anxiety is made worse by online warnings about "deprivation of capital," which makes some carers afraid to spend the very money they were given for the child.

Here is how the capital rules actually work.

The Three Thresholds

Under £6,000: Fully disregarded. Your savings have no effect on your UC award.

£6,000 to £16,000: DWP applies "tariff income" — they treat you as having £4.35 per month of income for every £250 (or part of £250) above £6,000. This reduces your UC award by that amount. At £10,000 in savings, the tariff income is approximately £70 per month.

Over £16,000: You are ineligible for Universal Credit entirely. Your claim stops.

Capital includes bank accounts, savings, ISAs, Premium Bonds and most investments. It does not include the home you live in, personal possessions, or the value of a business you operate.

What Counts as Capital for Kinship Carers

SGO allowances paid as a lump sum (for example, a start-up grant for furniture or equipment under Regulation 8) count as capital from the day they hit your bank account. If a council pays you £5,000 to set up a bedroom for the child and you already have £12,000 in savings, you are temporarily over £16,000 and could lose UC.

Backdated Child Benefit is disregarded for 12 months from the date of payment. After that, any unspent amount counts as capital.

Kinship Zone pilot payments are fully disregarded for UC. If saved, the accumulated amount can count as capital under the usual UC rules.

Regular SGO allowance payments (periodic, not lump sum) are disregarded as unearned income for UC. They do not affect capital thresholds. But once the money sits in your bank account and accumulates past £6,000, it becomes countable capital at the next assessment.

Deprivation of Capital

DWP can treat you as still having capital you have deliberately disposed of to increase your UC entitlement. This is the "deprivation of capital" rule, and it causes enormous anxiety among kinship carers.

The key question is purpose. If you spent a lump sum on its intended purpose — buying the child furniture, paying school fees, purchasing a car seat — that is not deprivation. You spent the money for the child, which is exactly what it was for.

Deprivation applies when someone gives away money, transfers it to a family member, or makes purchases with no reasonable purpose, specifically to get below the capital threshold. Spending a council grant on what the grant was given for does not meet that test.

If DWP questions your capital, provide evidence of what you spent the money on: receipts, bank statements showing purchases for the child, or a letter from the council confirming the purpose of the lump sum.

Practical Steps

If you are about to receive a lump-sum payment from the council, use it for its stated purpose and keep receipts. Report changes in your money, savings and investments through your UC account as soon as they happen. If you are unsure how the payment will be treated, ask DWP or a welfare rights adviser before making financial decisions.

If you are over State Pension age, consider Pension Credit instead. Pension Credit disregards the first £10,000 in capital and has no upper limit — a significantly better position for kinship carers with modest retirement savings.

Our kinship financial help guide includes a capital worksheet showing how DWP counts each type of kinship payment and a worked example of how tariff income reduces a typical kinship carer's UC award.

See more England guides →