- Any inheritance you receive counts as capital for Universal Credit from the point you receive it. Cash inheritance deposited in your bank account is counted in your capital immediately. Inherited property is counted at its net equity value.
- If your total capital after the inheritance is £16,000 or more, UC normally stops. Between £6,000 and £15,999, the tariff income rule reduces UC. Below £6,000 total, no effect.
When the change happens
You are required to report a change in capital to DWP promptly, usually within one month. The inheritance is assessed from the date you receive it (or from the date it becomes available to you). Failure to report an inheritance promptly can result in an overpayment that DWP will seek to recover.
An inheritance that sits in probate and has not yet been transferred to you is not yet counted as your capital. Once probate is resolved and the funds are distributed, you have a reporting obligation.
Inherited property
If you inherit a property, DWP will assess it at net market value (market value minus any mortgage or charge on it). An inherited property worth £80,000 with no mortgage is £80,000 of capital, well above the £16,000 UC limit.
There is a time-limited disregard for property being disposed of: DWP may disregard an inherited property for up to six months while it is on the market and being sold. After six months, if not sold, it will be included in the capital assessment. The disregard is discretionary, not automatic, so notify DWP immediately and provide evidence of the sale being progressed.
Using inheritance to clear debts or for legitimate expenses
Spending an inheritance on legitimate purposes — clearing a mortgage, paying off debts, making necessary home improvements, buying an asset you need — is not deprivation of capital. DWP distinguishes between spending in the normal way and deliberately dissipating assets to bring capital below the UC threshold.
Spending £50,000 of an inheritance on a luxury holiday, transferring large sums to family members, or deliberately reducing capital in an artificial way to qualify for UC could be treated as deprivation of capital. DWP would then treat you as still holding the funds when calculating UC.
Inheritance and Pension Credit
Pension Credit has more generous capital rules than UC. There is no hard upper capital limit equivalent to UC's £16,000. However, savings above £10,000 are treated as generating assumed income (at a different rate to UC), and large inheritances can still reduce Pension Credit significantly.
If you are pension-age and receive an inheritance, the Pension Credit rules rather than UC rules apply. The savings-impact calculator on this site is calibrated for UC. For Pension Credit, the treatment is different and an adviser can give a more precise answer.