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

Do I need a personal injury trust?

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 benefits will be reduced.

When you receive a sum of money you must inform your benefits agency, which will decide if your entitlement to benefits should change. If you have received personal injury compensation, are there options?

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.

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.

If you open a bank account or receive interest on a bank account, the tax authority is informed and that information is fed 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, your only choice is to set up a personal injury trust. A trust to protect your benefits means you keep your benefits 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. Read why a trust for your compensation is a positive thing.

Author: Mark Thompson

Personal injury and accident specialist solicitor

353 thoughts on “I have received personal injury compensation and claim means-tested benefits”

  1. Hello
    Im after some advice for my father please.
    My late mother passed away 3 years ago and my father has been awarded £30,000 for the neglagence claim.
    He is claiming benefits and only has £3000 in savings at the moment.
    Is there any way he can still keep claiming his benefits and also keep the payout for the neglagence claim ie in some kind of trust?
    From what i understand when he gets the payout and if he ends up with over £16000 in savings they will stop his benefits, any help would be a great. thank you

    1. This is an obvious case for a trust. It may be surprising, but the benefit regulations allow a payment in consequence of injury to be held in a trust and ignored.
      Do suggest your father call for a chat.

  2. Hi mark,

    I had a serious accident at work in 2018 and started claiming benefits .
    However I also had another accident at work in 2016 and was not on any benefit, I received a cheque for £17000 from my claim for personal injury.
    My solicitor did not inform/advised me about informing the DWP of this change and I have used £7000 from this to pay mortgage, a new shower room for my care and a new sofa?
    Am I in big trouble and will they find out
    Please help as I don’t know what to do.

    1. I am not sure I have all the detail i need to answer your question.
      When you claim benefits, you should declare all the funds you hold. In 2018, you shoud have declared all funds held by you and those you claim with. That declaration should include compensation. If compensation arrived after 2018, its receipt was a change of financial circumstances, which should have been reported.
      You can set up a trust now, but it will not wipe the slate clean.
      To be fair to benefit agencies, when they come across someone who could have set up a trust, but did not know about the possibility, they tend to be forgiving when a trust is eventually set up. The only proviso is, if an agency thinks you have been fraudulent, they will not be so forgiving.
      I would set up a trust now, particularly if you are to receive compensation for the later accidnet.

  3. Can a personal injury trust own a property and can the beneficiary live in that property and still get Universal Credit and pay the rent with that?
    thank you

    1. You will not be able to claim benefits to pay rent on a property you own.
      There is some help about renting from family members on the Shelter website here.

  4. Hello Mark.
    I would appreciate a couple of pieces of advice please, as I am seeing what seems to be conflicting info online regarding the type of trust needed for P.I awards / CICA (a ‘discretionary’ trust may be best?)
    Also, it appears that different disregard rules can be in place by DWP for differing benefits .

    My situation: I am in receipt of ‘old style’ income based ESA (I also receive non-means tested PIP)

    I will be receiving two separate compensations in 2022- one from CICA with the highest award coming from mental health injury, and also there will be a P.I compensation payment after a car accident, which is for physical and mental injury.
    The exact financial awards are unknown at present, but I believe I will need a trust(s)? in place.

    The conflicting info I see, is that the monies will be protected in a trust, or opposingly, because I am on old style ESA, then DWP likely may not use the same trust disregard rules, as they would for other benefits (such as UC etc)

    Also, having two separate awards rather than one makes things even messier.
    Would I need two separate trusts set up, or can a secondary separate award be paid into the initial trust?

    Sorry, another thought as I finish typing 🙂
    I hope to sell my house next year and would use the both compensations towards essential repairs so I can sell, and towards a deposit on the next home. Would this mean a trust would not be needed, as I would be investing in my home?

    Thank you in advance for any advice you can share.
    Best regards

    1. The various benefit regulations all talk of the compensation payment being held in a trust. In relation to the benefit regulations, a trust is what is required, there being no requirement for a particular typr of trust. I write bare trusts for compensation, as such a trust allows a level of control to the compensated person. You can be a trustee, you can end teh trust when you wish and you have the ability to add and replace trustees.
      I write trusts for any personal injury compensation you might receive, so one trust will cover both compensation payments.
      If your compensation is used to pay for a property in which you will live, benefit agencies should accept this use of the compensation and not stop or reduce benefits. I cannot be as clear i fthe compensation is to be used to repair/improv ea property for sale. I suggest you write to the benefit agency and set out your plans. You should then have written agreement, which is better than relying on a telephone call.
      If you do use compensation to buy part, or all of, a property, there is a good reason to hold the property in a trust. At the moment, property ownership is not a factor when assessing benefot entitlement, but that could change. Ownership of a property is relevant to the financial assessment for care. That assessment would have to ignore a property held by a personal injury trust, so think long term.

  5. I received a oersonal injury of two thousand one hundred. Told the dwp and have no savings.They said i could spend it but with covid and everything i was to anxious to spend and now over the 52 week. Im i now not allowed to spent it and is to late for a trust.

    1. If you received £2,100 and this sum left you well below the £6,000 line, you do not need a trust. This is because you remain well below the £6,000 limit.
      A benefits agency might say you have not spent the money reasonably, but that will only mean you will be treated as still having the money (called notional capital). Provided your funds remain well below £6,000, this will not matter.
      Use the money as you wish and do not worry.

  6. Good morning! I’ve just received 2500 pounds compensation from a back injury. I work but I receive an UC. This will affect my UC ? I have to tell them about this money ??

    1. I suggest you calculate how much money you have, then add the £2,500. If the total is comfortably below the £6,000 you are allowed to hold, you do not need a trust.
      Your financial situation has changed, so you should advise the benefit agency of your personal injury compensation.

  7. I have a friend whose 12-year old child was involved in a RTA. The child will receive an injury compensation for that. The parents are on UC. Will their child’s injury compensation affect their UC and child benefit? Will the child need a trust for that please?

    1. A settlement for a child must be approved by a Court. The Court will decide ho wthe compensation should be held until the child reaches 18 years of age. It is usual for funds to be helf by the Court Funds Office. Compensation “administered” by a Court is ignored for benefit purposes, without the necessity of a trust. If the child is receiving benefits when the compensation is to be released by the Court, trust can be set up at that time.

  8. HI I am on universal benefit and get around 1500 a month for me and my daughter, my husband is also in household but due to his visa restriction he doesn’t get anything. I am going to receive around £1800 for the injury and my husband will get around £4500. Should i inform DWP about this? or solicitors already told them? what is best to do.

    1. Your financial position is changed by the receipt of compensation. You should tell benefit agencies. As you can hold £6,000 with no effect on your benefits, your compensation should not change the position.
      When your husband receives compensation, that may well take you over the £6,000 line, so a trust for his compensation may well be necessary.

  9. Hi, I had a RTA in December where I had to be cut out if the car. I’m on PIP and ESA and am looking to hopefully receive £8000. I have an overdraft of £1400 and am hoping once I receive the money it will pay that off firstly and then two buy now pay later for a cooker that blew last month and a TV that blew in early December. Am I able to pay these off, a fewer smaller debts and my £1400 overdraft which will take me under the allow £6000 without being penalised? Obviously I haven’t squandered the money and can prove these purchases. Also do I need to inform DWP of my compensation once I receive it please? Thanks

    1. I suggest you wait until you know how much money you are to receive. At that point, put your plans to beneft agencies and see how they react. Putyour plans in writing and make sure the reply is also in writing. If you cannot get agreement, then, depending on the compensation amount, you may well need a trust.
      Do not start spending before you know how a benefit agency will react. You might think the expenditure is reasonable, but there is a distinct possibility a benefit agency will not agree.

  10. hi…i have just recieved £12,ooo as a dental negligence claim.
    i am in receipt of income support and child benefit.
    will this effect my benefit…i owe £3000 out already that i can show…and wish to buy a car.
    so im estimating i will have around £5000 left.is this something that is permissable.i have 6 children so a car will be beneficial.
    also reading above…if you advise me to put it into a trust fund, can we freely access this as and when we want.

    1. I presume this is the first payment of compensation.
      It is possible, but only possible, that benefit agencies will accept your planned expenditure is reasonable. If they do, you will not need a trust. You should have the reply in writing, as you cannot rely on the answer given by whoever answers the phone at the benefit agency. So do write to the benefit agencies, set out your plans and ask for their agreement there is no need to set up a trust.
      Do not spend any money before you have an answer. If you have to set up a trust, make the expenditure from the trust.

  11. Hi,
    Firstly, thanks for the excellent information on this site.
    Secondly, a question – I have been claiming ESA/HB/CTR/PIP for years now due to a spinal condition. Last year I had an accident which damaged my leg, and my solicitor estimates compensation of around £15k.
    I understand I need to create a trust, but my question is with regard to the CRU. As I was claiming benefits before the accident and they are not being paid as a result of said accident, will the CRU still recover the value of the last year’s benefits from my compensation?
    Many thanks for your time.

    1. A trust will protect your entitlement to receive means tested benefits. This is quite separate from the recoupment of benefits.
      The liability to repay benefits to the government lies with the defendant paying the compensation. You do not repay the benefits, the defendant must make that repayment in addition to paying you compensation.
      When calculating your compensation, you must give credit for certain benefits against certain parts of your financial loss.
      The recoupment system is explained in detail here.

  12. Hi iv just started to get gip ( guaranteed income payments ) from the armed forces and it’s bean backdated to date of discharge feb 2016 as well as a AFCS payment totals up to £67000.
    As you can guess iv bean on ESA since my discharge from the army. I have informed the DWP of both payments and the have asked for all the letter related to both payments from the Army so they can work out what they are going to do. They have already reduced my ESA to £23 every two week.
    But hear is the question iv bean told that they can’t take my AFCS GIP payment into account and they should still pay me full ESA is this true
    And all so can they take money from my back payment of GIP and AFCS payout

    1. I would be interested to know the source of the suggestion that guaranteed income payments under the Armed Forces Compensation Scheme should be ignored for the purposes of means tested benefits.
      The payments you receive are made in consequence of an injury to you, so I think the payments can be made to a trust and ignored.

  13. I am going to be receiving a compensation payment, it looks to be at least £15,000 minus solicitor fees etc, I receive child tax credit payments at the minute, not on universal credits, will this payment affect my child tax credits, as I have looked online and found on a few different websites that a payment would not affect either child tax credits or working tax credits, and also would I have to report the payment I am receiving to HMRC? Thanks for any help.

    1. Tax credits are based on your income. The compensation is not income, but if you invest and receive income/interest, that may reduce your tax credits.
      Your income has not changed, so i do not think you have to report the compensation.
      You should think beyond Tax Credits, as when you are moved to Universal Credit, which is a means tested benefit, your capital will become relevant.
      I write trusts for personal injury compensation, but do not claim to be a benefit expert. For my reply I relied on the website of the Low Incomes Tax Reform Group.

  14. Hi, so I’m currently receiving income based ESA and I’m about to get an interim payment of 10,000 for a work related incident. I was just wondering shall I tell them now of the changes in my financial circumstances or when the money comes into my account. Also the second question after I tell them can I just cancel the benefit or will they try to take money off me for cancelling? I have no other savings but will be trying to return to work.

    1. When your financial circumstances change, you shoud advise agencies which pay means tested benefits to you.
      If this is your first interim payment, it can be ignored for a period of 52 weeks. If you need to spend some or all of the payment, the best approach is to set up a trust and spend the money from there. The 52 week disregard is explained here.
      If you are not confident of returning to work, a trust will allow you to hold and use the compensation and preserve your benefits. If you do set up a trust, I will contact benefit agencies on your behalf once the trust and trustee bank account are in place.

  15. I am receiving UC and have been awarded a personal injury settlement of £2825. I have no savings, would this effect my UC claim please

  16. I am due to receive £20,000 compensation for unlawful detention from Home Office , and i am on Universal Credit full benefit. Will the compensation affect my benefit as it is not injury claim or compensation?.

    1. The Universal Credit regulations say “where a sum has been awarded to a person, or has been agreed by or behalf of a person, in consequence of a personal injury to that person” it will be ignored if held in a trust.
      What you must look at is the reason for compensation. If the compensation is paid for injury, this can be physical, psychiatric, psychological, distress or injury to feelings. Ask your solicitor how your compensation was calculated and the factors which are included. If those factors are included in my list, a trust may be possible.

  17. Hi, I have just accepted a settlement of £11,580.00 and I claim universal credit and housing benefit. I am pregnant with my second child and I have just been made redundant. Will this affect my benefits? I have no other savings. Thanks

    1. You can hold up to £6,000 and receive full benefit. If you hold £16,000 or more, your Universal Credit will no longer be payable. Between the two figires there will be a reduction in your benefit. A trust is the answer so do call before you spend any of the compensation.

  18. Hi
    My father was awarded £64,000 for an accident three years ago which was put into a personal injury trust.
    Due to injuries he received he had to move to an extra care housing facility and he pays the rent for this out of his income which is derived from state pension and attendance allowance. His savings have now fallen to below the threshold for claiming means tested housing benefit and I was wondering will the solicitor have informed DWP about the trust even though he as yet hasn’t claimed any means tested DWP benefit, or will I have to inform them when I make a claim?

    1. I guess the DWP have not been told about the trust. If no benefits were claimed, I would not have contacted DWP.
      In the application form, do not include this trust in the trust section. If you include it there, the trust fund wil be treated as capital. Towards the end of the application, there will be a section which invites you to provide information not already included.

      1. Ok, thank you for your help. I will include the information about the personal injury trust in the section that says any other relevant Information.

  19. I have been rewarded 21000 for a personaly injury claim i have set up a trust as advised by the solictors, only to be told by my mortage advisor i cannot buy the house from the trust and can not put the house in the trust once purchased so im so frustrated. The trust was only open today can i cancel it ? I was not given any information im a first time buyer and really struggling with all of this. I am unable to work due to my injurys so with this money i am in the middle of getting a mortage. My 52 weeks runs out in April , if i did buy this house and didnt put it in the trust would my universale credit be stopped ? Everything was declated to DWP April last year.
    Thanks david

    1. I would be surprised if your trust cannot buy property. Check the trustee powers.
      I understand that mortgage lenders do not like lending where the property is owned by a trust. You need to consult a specialist mortgage broker.
      I think the trust can only hold that portion of the property for which it has paid. If you cannot get a mortgage for the rest, check if the trustees can make a loan to you. That loan can pay the deposit, you can arrange the mortgage and when the house is sold, the loan can be repaid to the trust.
      I recommend the loan be registered against the property, which will be second in priority to the mortgage. The solicitor who acts for you in the purchase can held you with these steps.
      At present, property ownership is not rel;evant for means tested benefits, but it is very relevant for care. By having a formal loan, you can satisfy agencies the trust is involved and protects a portion of the property.

  20. Once iv been offered compensation should I tell UC right away or wait till I get the money? do I need a lawyer to set up the trust account?

    1. First decide if you need a trust. When I write trusts for clients, I deal with the notification of benefit agencies.
      Your trust must satisfy banks and benefit agencies. I would say, a trust should be prepared professionally.

  21. Hi, I am currently on legacy benefits and receiving income support with disability premiums, pip, child benefit, child tax credit (for 1 child) housing benefit and council tax reduction. I have just accepted an offer of £60,000 for a car accident I was involved in 4 years ago. Will all my means tested benefits stop once I receive this money or do I have 52 weeks before it gets taken into account? Also, how can they judge that you’ve blown the money to carry on claiming benefits?

    1. If you have not already received an interim payment, you can rely on the 52 week disregard and set up your trust. If you have received an interim payment, the compensation should be paid to a trust bank account.
      The 52 week period is there to allow you time to arrange the trust. It is not a period in which to blow the money. Read more here and think carefully.
      Your compensation is reported to the Department for Work and Pensions by the party which pays you compensation.
      The test of what expenditure is reasonable is a tough test. A broken fridge could be replaced, but an upgrade would not be reasonable. Do not be tempted to play with the system, as you can set up a trust, keep your benefits and spend your trust money very much as you like.

  22. Hi I am in receive of universal credit and housing benefits I am about to receive compensation for £2500 I have no saving and wondering will this effect my benefits many thanks josh
    As I don’t want to put it through my solicitor with a trust as they have took over 3 years to amend my claim many thanks

    1. As you have no capital, receipt of £2,500 will have no effect your means tested benefits. You can hold up to £6,000 and still receive full benefits.
      To understand how means tested benefits work, have a look here.
      You ought to tell the benefit agencies about the money, as you have a duty to let them know when your financial circumstances change.

  23. Ihave been made redundant i am currently on universal credit,i amdue a pay out from an accident,my solicitor had advised to put it in a trust fund,will my benefits stop completly if i get over £8000.thank you.

    1. Means tested benefits stop if you have savings of £16,000 and reduce if you have more than £6,000. You should decide on a trust onc eyou know how much compensation you will receive.

  24. I am self employed and on a low earning wage. I previously claimed tax credits to top up my wages, which were changed to universal credit as a low earner. Each month I have to go online and declare my earnings for the month and they work out my entitlement. I have just been awarded £1900 for a non fault road accident so would I have to declare this to DWP as it’s not earnings?

    1. The compensation is relevant to Universal Credit, but will not reduce the benefit, provided you do not have much money in savings.
      Do declare the compensation and make it clear the money is personal injury compensation. The compensation is not income, but it is best to be open about what money you have.
      Unless your savings exceed £4,000, with this level of compensation, you will not need a trust.

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