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.

Where is the sneer ? It’s a fact.

You’re very good at the reverse aren’t you ? You explain to me how you think it’s right for wealthy people to avoid tax - whether legally or not - but it’s not right for benefit claimants to try to legally maximise a windfall amount they are unlikely to see again. I’m not averse to either if it’s legal but I don’t see how you can allow one without the other. OP is a tax payer herself. She may not be a net contributor but she does contribute, so where is the equity here ?

Can you spend 6k on paying off your car and doing up your home and keep the other 6k towards right to buy in future?

This seems the most sensible to me. Legally enforceable debt is allowable expenditure on UC. OP has £2.5k total debt so she could pay that off, get advice as to what counts as essential expenditure on her home and then look at the balance of what’s left. She could put the remainder of the first £6k into right to buy and the other £6k wouldn’t affect her entitlement.

I’ve never advocated for tax evasion, that’s illegal.

Would a Teaching Assistant be allowed to do that ? They work for the local councils and pensions contributions are taken directly from their salaries as a percentage of their monthly gross pay. I know they are allowed to sometimes opt into a scheme to pay a slightly higher percentage, but surely not a lump sum?

I’m interested in this. Is this the truth? Who are the businesses who are avoiding tax and paying peanuts to their staff? Can you name them? I genuinely want to know.

Avoidance not evasion.

Actually... Tax avoidance isn't illegal. Tax evasion is. (I thought avoidance was illegal too, til I googled it a few days ago.)

Tax avoidance is technically legal because it involves using the letter of the law and legal loopholes to pay less tax. However, it bends the rules and goes against the spirit of the law. This differs from tax evasion, which uses illegal deception and hidden facts to avoid paying taxes.

Tax Avoidance vs. Tax Evasion

• Tax Avoidance (Legal):
• Uses HMRC or government-approved rules and loopholes to lower tax bills.
• Involves full disclosure of financial details to the tax office, even if the result is unexpected by lawmakers.
• Can be challenged or closed down by the government if it is deemed aggressive or abusive.

• Tax Evasion (Illegal):
• Uses lies, fake records, or hidden income to deceive tax authorities.
• Involves criminal acts like keeping cash sales off the books or hiding offshore accounts.
• Leads to heavy fines, court action, and prison time.

Thanks, I do know tax avoidance isn’t illegal - the reply was part of a conversation string. The poster knows I wasn’t referring to tax evasion.

Exactly.

Avoidance is just not paying more tax than you have to… sensible.

Evasion is not paying the tax that you have to pay

@ThreadGuardDog

DWP would more than likely treat any lump sum put into a pension pot as deprivation of capital. If OP removed a lump sum from the inheritance specifically to take her under the savings threshold they would treat the sum as notional capital and count it anyway.

There are a number of ways OP could spend the money without penalty. She could pay off her debts which amount to 2.5k, everyday items for her new home such as appliances, furniture etc and most everyday spending is allowed such as clothing and standard personal possessions. Intent is what matters so large lump sums, rapid spending etc would be closely reviewed as to the circumstances.

Yes. I know. I didn’t mention tax evasion. I said avoidance. My point is that if it’s sensible to avoid paying more tax than you legally need to, then it’s also sensible to protect a lump sum that you’re never likely to see again from being swallowed up by benefit rules. There is a perfectly legal way to do this and that’s what most posters, including myself, have been advising OP to do.

Well of course the big ones that spring to mind are corporations like Amazon and eBay - Amazon are well known for overworking and underpaying their staff while having the main portions of their business set up overseas to pay minimal taxes in this country. EBay pay mostly Indians to run their customer service (so very, very few uk jobs provided) and again, aren’t registered as a uk business.

There are others, of course. There are legal loopholes they can and do exploit, and it results in them making billions and paying people the bare minimum and the bare minimum of tax. You can look into it if you’re interested/curious. They are regularly and widely criticised by socially conscious journalists etc and there are whole movements of people who try to spend their money at local businesses for example to avoid contributing to it.

Agreed, and I would go as far as saying that a single mother given a gift in her nan’s will absolutely has more right to do so than major billion £ global corporations do to hide/minimise theirs.

Let’s just hope her nan didn’t commit the seemingly cardinal sin of being wealthy or she may get less that she thinks if it’s hit by inheritance tax…

I think you’re projecting here. I never said anything about wealthy individuals, which I have already pointed out. You are the only one here who has expressed judgement on another individual’s personal financial circumstances.

Google suggests Amazon paid £1.3bn in direct taxes in the UK in 2025. Sounds like a lot but it’s actually a 4% tax rate. So, I have to agree, that’s bullshit and absolutely shouldn’t happen.
I would argue though, in the same way that there are a percentage of fraudulent benefit claimants, there are dodgy businesses, but most are not like that.

You really are the original spectre at the feast on this thread.

Amazon are one of the most frequent targets for this kind of criticism. Most small businesses are not like that, I agree, but I think the biggest businesses are shocking in their treatment of staff and do everything they can to avoid paying out. So many are implicated in slavery, and I mean actual slavery not just “sweat shops”, but of course there’s that too. Not to derail!

I’m sure you are right. But SMEs make up more than 99% of businesses in the UK. Stating that “businesses” are ripping people off, avoiding tax and treating staff badly is not a true reflection of business here in the UK. There are a few bad apples, like in any scenario, but it’s not the majority.

I don’t think I said businesses were ripping people off? I said major/global corporations do everything they can to avoid paying tax.

Sorry your thread has gone this way Op. You reached out for help and advice, totally understandably under the circumstances, and you can’t just talk about your concerns without someone with an axe to grind making it their personal mission to upset you.

You are right, your nan did a lovely thing for you. You are doing a great job with your DC and making sensible plans for the future. Try not to let small minded and frankly, horrible people get you down 💐

It was undoubtedly a step too far, OP, which is why I used the phrase I did in response to that post above. It comes from arrogance preventing any thought as to why that was not a comment that was needed, not in any way.

If your Nan was anything like mine I bet she will have said, people who can make such remarks are more to be pitied.