- 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 more than £16,000, UC normally stops. Between £6,000 and £16,000, the tariff income rule reduces UC. Below £6,000 total, no effect.
When the change happens
You must report a change in your capital to DWP as soon as it happens. 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.
It can count before the money reaches you. DWP's guidance treats something left to you specifically in a will as yours from the date of death, and your share of the rest of the estate as a right that can be valued and counted as capital while the estate is being sorted out. Tell DWP as soon as you know you are due an inheritance.
Inherited property
If you inherit a property, DWP will assess it at its market value less 10% for the costs of selling and less any mortgage or charge on it. An inherited property worth £80,000 with no mortgage counts as £72,000 of capital, well above the £16,000 UC limit.
There is a time-limited disregard for property being sold: Universal Credit ignores a property you are taking reasonable steps to sell for 6 months from when you started, and DWP can allow longer where that is reasonable. After that, if it is not sold, it is counted. Tell DWP straight away and keep evidence that the sale is going ahead.
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.