I have received personal injury compensation and I claim means-tested benefits

Receiving means-tested benefits depends on the money held by you and those included in your claim. The usual barrier to a claim is holding £16,000, but if you hold more than £6,000 your benefit entitlement is reduced.

When you receive a sum of money you must inform your benefits agency which will decide if your entitlement to benefits should change. So if you have received personal injury compensation do you have any options? The factors to bear in mind follow.

When you make a personal injury compensation claim the insurance company receiving your claim must inform the Department of Work and Pensions (“DWP”) of the claim.

If you receive an interim payment or final settlement the insurer must inform the DWP.Help on personal injury trust 0330 223 1708

When you receive an interim payment or final settlement you must tell your benefit agency of the change in your financial circumstances.

Personal injury compensation will be disregarded for a period of 52 weeks, but take care and read on.

Some incorrectly say you can blow the compensation in that 52 week period. You can spend it, but if your benefits claim continues, how you spent the compensation will be scrutinized. If you are shown to have blown the money to allow you to continue claiming benefits you will be penalized. The compensation is not ignored permanently. The 52 week period is there to allow you to sort out your affairs and set up a trust, not blow the money and keep your benefits.

If you open a bank account or receive interest on a bank account the tax authority is informed and that information is fed back to the benefit agencies.

As we move into the Universal Credit system there will be more information shared between the various agencies of the government.

Unless you have a small sum in compensation, or legitimate ways to spend the compensation quickly, your only choice is to set up a personal injury trust. A trust to protect your benefits will give you time to stop and plan and use the compensation for what it was intended.

There is an inconvenience in a trust, as you need trustees and a separate bank account, but weigh this up against the benefit of keeping your benefits and the choice is easy.

About Mark Thompson

Personal injury and accident specialist solicitor
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135 Responses to I have received personal injury compensation and I claim means-tested benefits

  1. Gemma says:

    Hi I’m a single mother currently on JSA, child benefit & child tax credits at the moment. On Boxing Day I was hit from behind whilst being stationary as a passenger driver. I suffered injuries to the right of my neck . I have put in for a personal injury claim. I have been offered a reward of 1,300. Do I need to inform dwp of this reward? I’m worried my benefits will stopped When I am better I was looking to pay off my driving lessons

    • Mark Thompson says:

      I will assume the offer is a final settlement rather than an interim payment.
      Forgetting the compensation, check how much money you have. If you then add the compensation, are you anywhere near £6,000? If well below £6,000, you do not need a trust, as there is not enough compensation to warrant the protection of a trust. By all means tell benefit agencies once the money is received, as your financial situation has changed. If you have done your sums correctly, there will be no problem.
      If the offer is an interim payment and you expect a much higher final settlement, we can think about setting up a trust now, so everything is tidy and your benefits will be protected.

  2. Vic says:

    Hi I work part time so get some housing benefit and working and child tax I’m due to get roughly 10000 for a rta will I need a trust? And how does a trust work will I be able to withdraw money from it at any time? Thanks

    • Mark Thompson says:

      The benefit regulations, quite generously, allow you to keep your benefits and personal injury compensation.
      The trust for compensation operates separately from your personal funds and should not be used for the basics of life, that being the role of your benefits.
      As the compensated person, you must not have personal access to the trust fund, although you can be one of the trustees. Expenditure from the trust should be direct, the compensation not passing through your hands or personal bank account. You might think this a nuisance, but compared to losing benefits, it is a nuisance worth putting up with.
      There are some Q and As here which will help you.

  3. Kath Webster says:

    Hi, I’m due to receive a considerable amount of compensation due to a RTA. I’ve opened a trust fund to store the funds in as advised. My question is dwp are going to recover around £25,000 of benefits already paid to me. If money is being kept in TF to secure my benefits why do I have to pay this money back. I was claiming the benefits long term before the accident.

    • Mark Thompson says:

      The trust is designed to protect the compensation you actually receive.
      Quite separately from the compensation you receive, the party paying the compensation, usually an insurance company, must repay to the government any benefits you have received as a result of the accident. They also have to repay the cost of your NHS treatment after a road accident. I say again, these liabilities are quite separate from your compensation.
      Within the calculation of your compensation, you have to give credit for certain benefits you have received. As examples you must give credit for ESA received against the wage loss element of your claim, or give credit for the care component of DLA against the care element of your claim.
      These points are covered by the recoupment regulations which you can read about here.

  4. Chlo says:

    I am due to receive compensation of 22000 for sexual abuse suffered as a child. I’m a single mum of 2 and baby on way. I claim income support, child benefit, child tax and housing benefit.. How is this all gping to be effected? Will all benefits stop?

    • Mark Thompson says:

      Receipt of £22,000 will stop all of your benefits. Ignore all the nonsense about spending it within 52 weeks and set up a trust.
      The benefit regulations specifically allow personal injury compensation to be ignored, provided it is held separately from your personal funds in a trust. This is a generous provision, sometimes thought too good to be true, so the best and obvious course is to take advantage and set up a trust. The way I work and my fixed fee are set out here.

  5. Ed says:

    Ok thanks for that. However, should being a trustee become too onerous, can i revoke the role? Also are there any particular terms i might expect to see in the trust which lessons my responsibilities, ie. being expected to invest the money etc? I am happy to write cheques for the beneficrary when requested but not a lot more.

    • Mark Thompson says:

      A trustee can retire/resign.
      A trustee can only be criticised by a beneficiary. If you are a trustee of a bare trust which holds compensation, you could work with the beneficiary and avoid the role becoming onerous.

  6. Ed says:

    Hi, i have been asked to be a trustee for a friend on means tested benefits. Does being a trustee for a large amount of money 100 – 200k affect my own ability to claim benefits in the future? If i need to can i revoke my role as trustee? Thanks

    • Mark Thompson says:

      If you are a trustee, you are not treated as personally holding the trust fund for tax or benefit purposes. You are holding the trust funds in the capacity of trustee, so it is not yours.

  7. Kathleen Dixon says:

    Hi I receive housing benefit and CT benefit. Wtc and Child tax credit. I received 10k in compensation for a RTA injury this included expenses. I have no savings and I owe 3ķplus interest to my auntie as she loaned me the money to get a car pay insurance and car seats.How much of this will they take into consideration when reducing my benefits and what benefits will they reduce. Thanks

    • Mark Thompson says:

      Your housing benefit and council tax reduction are means-tested benefits and will be reduced by about half, as you will hold funds above £6,000.
      benefit agencies will agree that repayment of loans is acceptable, but they do not like loans from friends and family. They may suspect this is a mechanism to tuck the money away and keep your benefits.
      They may not live with the costs associated with buying a car either.
      All personal expenditure you make is subject to benefit agency assessment. If they do not agree the expenditure is reasonable for someone on benefits, you will be treated as still having the money, which may reduce your benefit entitlement. The money spent is treated as notional capital.
      You can talk to your Council about it, but I suspect the answer will be this expenditure, or a good part of it, is not acceptable for someone in receipt of benefits.
      If you make these payments from a trust, there can be no objection, so I think a trust is the best route.

  8. William says:

    I am a disabled person. My parents have set up a trust to leave there money to me once they pass away. Am I still able to set up a personal injury trust..

    • Mark Thompson says:

      Yes. If you receive personal injury compensation there is no reason why you cannot set up a trust for that compensation.

  9. Stacey says:

    Hi my husband is possibly getting a personal injury settlement of £8000 and we receive child tax credits. Will we need to open a personal injury trust or not?

    • Mark Thompson says:

      If the household receives no other benefits, the answer is no.
      Tax credits are based on your income and compensation is not treated as income. Do take care there are no other benefits such as ESA, housing benefit or council tax reduction.
      For more information read here.

  10. William says:


    I am currently trying to caim compensation under the human rights act. Is it possible to set up a trust chould I be successful

    Many thanks

    • Mark Thompson says:

      The regulations for each benefit vary a little, but the basic rule is that compensation paid in consequence of any personal injury can be protected for benefit purposes in a trust.
      Compensation can include physical and psychological/psychiatric injury. Cases like yours can include these elements, so it is possible some of the compensation can be protected for benefit purposes by a trust.

  11. James says:

    Hi, I recieved a personal injury compensation, and have put it into a bare trust with the bank. My means tested benefits are not affected by this I know, but I would like to invest the money either on the stock market, or perhaps to buy property. Is this possible without my benefits being affected? Many thanks.

    • Mark Thompson says:

      Your trust should have been created with a trust deed, not just by opening a bank account.
      The trust deed will set out the investments which the trustees can make. Provided those investments are held by the trust, they are trust assets and will not alter your benefit eligibility.

  12. Manny says:

    Hi. I received a compensation payment for £5250. I have no savings and will use the payment to pay off my credit cards. I receive working and child tax credits. Will these be affected?

    • Mark Thompson says:

      If you only receive tax credits, receipt of compensation is not a problem. Tax credits are based on your income and receipt of compensation is not treated as income.
      You only need to think about a trust if you receive, or are likely to receive, means-tested benefits, a few examples being income-related Employment and Support Allowance or Jobseeker’s Allowance, Universal Credit, Housing Benefit and Council Tax Reduction.
      For more information about tax credits and trusts click here.

  13. Sheila Brown says:

    Hi , I am on lOng term sick leave and my employers are thinking of offering me a settlement. I am 62. Do I still get my occupational pension and does it affect Universal Credit? Am I treated as leaving work voluntarily?

    • Mark Thompson says:

      The best place to check your benefit entitlement is https://www.entitledto.co.uk/
      I suspect any settlement and the occupational pension will be taken into account when assessing your entitlement to Universal Credit, but us ethe calculator on the link above to check.

  14. Sian says:

    I have just recieved £2800 personal injury compensation and I claim single persons jsa along with child tax credits and child benefit..I dont have any other savings or money coming in. Do I have to declare my compensation? Thanks

    • Mark Thompson says:

      If your JSA is means-tested, your financial position has changed so you should declare the compensation. You may find you are only on contributions-based JSA, in which case it is not a means-tested benefit and there is no need to declare the compensation.
      In any event, if you have no other money, receipt of £2,800 will not effect your benefit entitlement.
      Child benefit is payable to a household with income below £50,000.
      Tax credits are based on income. Compensation is not income.

  15. emma says:

    thankyou we recieve income based jsa and we dnt have any savings

    • Mark Thompson says:

      With the compensation, your total funds will be well below £6,000. If £1,088 is all you are to receive from this personal injury claim, you do not need a trust.

  16. emma says:

    hi im due to recieve a compensation payment of £1,088 my partner claims jsa for the both of us and i recieve child tax credits/child benefit.will my benefits be affected? And can i spend that money or do i have to keep hold of it for 52 weeks

    • Mark Thompson says:

      I do not know if the JSA is contributions based, or depends on the family finances. I will assume you are receiving one or more means-tested benefits.
      You get full finances if you have funds below £6,000, with a gradual reduction up to the maximum funds of £16,000. If the £1,088 you are to receive leaves you well below £6,000, you do not need a trust.
      Child benefit is paid to households with income below £50,000, so compensation will not effect eligibility.
      Child tax credits depend only on income, so the compensation only plays a part if you gain income from the compensation. More information here on tax credits and compensation.

  17. Sue lumsden says:

    Hi there. I’m on esa and been involved in a accident I’m not sure the amount of compensation I will be awarded but I’m wanting to know.
    Do I have to declare it to the esa, am I allowed savings if so how much before I have to declare it.
    I was told £9,000 but I’m not sure.

    • Mark Thompson says:

      Do not worry about benefit agencies until you know you are actually going to receive compensation and the amount.
      For most benefits you can hold up to £6,000. You can actually hold up to £16,000, but between £6,000 and £16,000 the benefits are reduced.
      To understand your benefit entitlement there are a number of benefit calculators online, my current favourite being at http://www.entitledto.co.uk

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