- Personal injury compensation has special treatment in the UC capital rules. A payment made for a personal injury — whether from an insurer, court award or out-of-court settlement — can be disregarded as capital in certain circumstances. The disregard is not automatic and depends on how the money is held and what it is being used for.
- The most protective route is a personal injury trust. Capital held in a properly constituted personal injury trust is disregarded indefinitely for most means-tested benefits including Universal Credit.
The 52-week disregard for lump sum payments
When you first receive a personal injury compensation payment as a lump sum and do not yet hold it in a trust, DWP can disregard it for up to 52 weeks from the date of receipt. This gives you time to set up a trust or to spend the compensation on the purpose it was awarded for (typically care, adaptations or loss of earnings restoration).
The 52-week disregard is applied at DWP's discretion and requires that the payment is clearly identified as personal injury compensation. Keep all documentation: settlement letter, court order, or insurance payout correspondence.
Personal injury trusts, indefinite protection
If you establish a personal injury trust (a formal legal arrangement under trust law), the funds held in it are disregarded indefinitely for UC capital purposes. This is the most robust long-term protection for larger compensation awards.
A personal injury trust typically requires a solicitor to establish and administer. The costs are usually modest relative to the protection provided. Most personal injury specialists can advise on this. Once the trust is set up, the assets inside it are outside the UC capital assessment entirely.
Compensation that does not qualify for disregard
Not all compensation is personal injury compensation for UC purposes. Compensation for financial loss, discrimination awards, delayed benefits, housing disrepair or general contractual disputes does not qualify for the personal injury disregard. Those payments count as capital in the normal way from the date of receipt.