Inheritance while on Universal Credit: what are my options?

[Stressedmum6761]

Hi everyone! 👋 I'm currently losing my marbles and need to speak to anyone who's been in the same boat.

My nanny passed away nearly 2 years ago now and it's taken a while for her things to be settled and sold etc. My family passed me a letter today addressed to me from my sweet, beautiful nan and a cheque for nearly £12K. I've been in absolute bits all day I keep bursting into tears. I've never had this much in my life and never ever expected anything from my nan at all and it's absolutely thrown me.

The thing is I know I should be absolutely THRILLED with this money, I'm on my own with DD who's 6 now. We've just moved into a council house 2 months ago and I'm on UC top up which also covers my rent, my job doesn't pay well but it's a school job and I get my holidays off with DD. I'm panicking more than anything because I know that as soon as I cash this cheque UC are going to deduct money each month (about £120 if my maths is correct).

My family said they know nan wanted me to put a deposit down on a house, which again I know if I get a mortgage my UC stops and I'm financially liable for the payments and any repairs etc if anything goes Pete Tong.

I'm thinking about just putting most of it in a LISA for now and potentially in the future buying a house...maybe a once in a lifetime holiday with the rest. I'm just torn because if I buy a house, I'll be so much worse off than I am now getting help from UC with rent payments etc. I've just moved into this house and started decorating and making it my own. I'm worried about the money sitting there and me being so scared to spend anything while also having money deducted from my monthly payments. Again, I'm absolutely ecstatic I've got this chunk of money for security but the fact that it's going to effect me whether I spend it or not is flapping me to the core.

What do I do? Has anyone had experience with coming into money while also being on benefits? Thank youuu from a very emotional and stressed mum.

"As I’ve said, carers, TAs, etc etc are of course essential and work bloody hard. Most people understand that"

You could argue that people such as OP in work being stuck on benefits and unable to upskill / eventually earn enough to not need them is a contribution to the productivity crisis. Too many working people will be stuck on benefits their entire working lives

I think someone calculated that she would lose about £100 a month in UC. The investment growth would likely be about this amount and so she wouldn’t be so much worse off (or even slightly better off each month depending on how the markets are doing). An invested amount generally doubles every 7-8 years due to the gains

I don’t understand this attitude either. People who’re net contributors are being taxed more and more and having to budget more. They’re seeing their cost of living go down. They often live in high housing cost areas, so their money doesn’t go far. It seems unkind to attack them, when they’re paying their taxes in full. It’s the ones not on PAYE that can be more creative with their taxes.

Ultimately very few UC top ups go to those in full time work if you look at the ONS figures. OP is classed as part time because school workers work 9 of the 12 months.

@ThreadGuardDog From there we can look at the super rich and fat cat corporations who have accountants well versed in tax avoidance.

can you help me understand your world view which seems to be suggesting that you’re against tax avoidance noting:

1. you seem ok for those on UC to find ways to optimise her take home, helped by those well versed on the rules of the UC game (what’s allowable expenditure, what’s the maximum you can hold etc). It’s essentially the same: maximising your financial position within the rules of the game
2. tax avoidance is entirely legal (evasion isn’t) on the basis it’s individuals (or entities in the case of companies) just finding ways to abide by the rules that the government has decided which, according to some in this thread, makes it all ok

I’m just trying to understand why in some cases it’s ok for individuals to optimise their financial position within the rules of the game but you seem aggrieved when others do the same?

for clarity, my position is both circumstances are ok. Why would anyone want to have a non-optimised financial setup? If they want to pay more that’s fine and can also contribute to charity if they wish

@ExpectMore it is not comparable at all. OP has had a 1 off windfall not a regular wage. 12k could be spent pretty quick. Then the no money left at all.

The example you gave.... that person will still have money due to their regular income.

I know you weren’t talking to me, but a woman struggling to make ends meet to provide for her child is not the same as a multi-billion £ corporation that routinely avoids paying tax on its profit.

It’s not about individuals earning enormous amounts (although there are lots who would volunteer to be “over-taxed” to help people like the OP) it’s the global companies paying their employees (who make the business possible) pennies, while they rake in billions and have their business set up so their tax money doesn’t contribute to this country at all.

I don’t think she was dismissing all net contributors, I think she was being attacked by someone who had a chip on their shoulder due to their own personal situation and she responded to their attitude and attacks. There are lots of net contributors who do not begrudge people on benefits. There are lots of non-net-contributors who do, because “they work full time so why should anyone else get away with part time” etc. There’s a lot of anger and it’s built that way imo, to keep us fighting with each other instead of the people who have made it all this way.

I think there’s a misconception here. Tax avoidance is absolutely for the average worker, who puts money into a pension or an ISA wrapper. To ensure they qualify for child benefit still etc. its not big greedy corporations, it’s something millions of people do every year

The point I’m making is that even if millions of poor people are doing this every year, it is legal and they’re doing it out of necessity, because they otherwise wouldn’t have enough to provide for their children. Major corporations are doing it on billions of £ of profits, that they make by exploiting their workers. There is not only one corporation doing it, and they can have their business set up so none of their tax money goes into the uk economy. OP’s taxes go into the uk, just like all other uk citizens.

Hmm. Windfall is a good point. When utility companies had windfalls (ie benefitted unexpectedly from something outwith their direct control) there were loud cries for them to be heavily taxed on it…. Can you see my point?

we can have different rules for everyone

How can you equate a millions turnover water company with the original question on this thread? 🤣

Hi, yes I think I'm going to pay off my debts first and foremost. Then maybe put some of it in an ISA and the rest I'm not sure.

I did want to put some in an ISA for my dd but I've been advised that UC will see this as me hiding money...even though it will be in her name and she won't be able to touch it till she's old enough. I need to speak to a professional really.

Agreed. I mean, the whole concept of ISAs, for example, is tax avoidance.

although have to admit that overall, the system is too complicated. I think it’d be much better if everyone was taxed at the same rate of say 20% on everything. Would make it much simpler to understand and thus less costly to administer

So minimum wage - 20% tax?
Billionaire passive income - 20% tax?

You really do. CAB advise on benefit/income maximisation confidentially. Could be a first port of call?

I can’t imagine there being an issue with you putting savings aside for your child. That’s sensible and a very normal thing to do. To me (I’m not an expert) but that doesn’t seem like deprivation of assets.

Just FYI an ISA still counts as capital for universal credit..so benefit receivers aren't squirreling away money in them unless they are doing so illegally, which isn't what is being discussed here.

The child ISA is a timing issue ie moving it out of your new asset pot - deprivation of assets.
Any existing child savings when starting a claim isn’t included.

Don’t forget behind most large corporations are many shareholders, many of which are pension funds ie the general public. So heavily taxing the large companies in the way that many seem to want to do in an attempt to “hurt the rich” is in many ways self defeating.

When I meant put it in a stocks and shares ISA for you, I meant the money that you’ll make will likely keep pace with, or be more than, what UC will deduct from you. My eldest’s stocks and shares JISA for example has made £2k on a £3k deposit within three years. Generally you can expect the original deposit amount to double within 7-8 years if left untouched.

And sorry for the confusion, I was responding to a PP about ISA’s being a wrapper for tax avoidance, just to show millions of normal people are doing it every year. A separate point sorry. The ISA will affect your UC deductions for savings, but hopefully if invested, will have increases above what they deduct

It’s all relative. They “rake in billions” as they have a lot of activity (read jobs). Their actual return isn’t much.

Consider Centrica for example, £22Bn revenue, 3.6% return.

3.6% return is hardly taking it in.

Why not? The billionaire is still paying a hell of a lot more than the person on minimum wage given 20% of a hell of a lot is still a lot more than ~£4k!!

Right. Yes. Just when I thought it couldn't get any more bizarre.....

What’s hard to understand? The same % applied to all. Noting, some countries already have similar models

or is it that it breaks a model of increasingly punitive penalties on those that have more than others think they should?

Oh I understand, truly. Continue brightening my day 😅

Just re: ISAs, OP. The benefit of them is that the interest is tax-free, which is appealing to high earners who have lots of savings. In your tax bracket, you’re allowed £1000 of tax-free interest in regular savings each year (you’d need about £20,000 in savings to hit the £1000 interest). At the moment, ISAs don’t always have the highest interest rates. So don’t be afraid to open a regular saver and/or a bog standard savings account if the interest rate is higher than what you’re seeing in ISAs. You won’t hit the threshold for owing tax on your interest. Go for the highest interest rates, regardless of what type of account it is.