What Can I Buy That Is Not Deprivation Of Capital?

When someone deliberately reduces their capital or transfers it to someone else (usually a family member or close relative) with the aim to be eligible for benefits or increase the scope and scale of benefits that they are able to claim, it is termed as “Deprivation Of Capital”.

While there is no textbook definition of capital when it comes to claiming state benefits, it generally includes one-time payments, savings, investments, property, land and other assets.

What Can I Buy That Is Not Deprivation Of Capital?

According to the Guidance manual on assessment of capital, the following situations will not be considered as deprivation of capital:

If the claimant has sold or transferred capital with the intention to:

  • Reduce or return the debt that they owe (either to an individual, bank or the state)
  • Make credit cards payments
  • Pay for mortgage
  • Make payments for day to day expenses
  • Improve their quality of life (for e.g by purchasing a new car or rebuilding a kitchen)
  • Improve their quality of health through medical expenses
  • Go on a holiday

On the other hand, if local councils are able to prove a deliberate reduction in any of the following by individuals claiming benefits, they will be held responsible for the deprivation of capital, making it considered as notion capital:

  • Residential premises (other than the one the claimant lives in)
  • Capital under the care of someone else
  • Payments or instalments of income
  • Compensation payments
  • Arrears of payment
  • Capital not held in the UK
  • Business assets
  • Company or trusts owned by the claimant

To explore the topic in-depth, we will try to answer the following questions through this article:

  • Does Deprivation Of Capital Affect Housing Benefit?
  • How Is Capital Taken Into Account For Means-Tested Benefits?
  • Is My House Part Of Capital?
  • What Counts As Deprivation Of Assets?
  • How To Reduce Assets?
  • What Benefits Are Means-Tested?
  • What Is An Assets And Income Assessment?
  • How To Avoid Deprivation Of Capital For Care Home Fees?

Does Deprivation Of Capital Affect Housing Benefit?

According to The Deprivation of Capital Rule in Welfare Benefits | Social Welfare Updates | News deprivation of capital will directly lead to the capital being considered as notion capital; which means that capital that was earlier excluded from the means test will not be accounted for. This act reduces (in some cases removes) the benefits claim of individuals against whom the deprivation is proven.

If you live in sheltered or supported housing and are above state-pension age, you may be able to claim Housing benefit (recently replaced with Universal Credit) to pay for your rent. The eligibility criteria also state that claimants must either be unemployed, on a low income or have low savings. However, Housing Benefit will not cover the costs of food, heating, energy or heating costs. If your Housing Benefit does not cover the entire amount of rent, you may consider applying for a Discretionary Housing Payment through your local council

How Is Capital Taken Into Account For Means-Tested Benefits?

The capital of partners/spouses is jointly accounted for financial assessment prior to benefits claim; however, the capital of a dependant child’s is ignored.

Claimants who own capital worth less than £6,000 will not have any benefit claims affected; however, as the amount of capital increases, their benefits claim starts to get affected such that for every £250, an income of £1 is assumed which reduces claimant’s benefits. 

In the case of Universal Credit, the amount is £4.35 per £250. As for Pension Credit, the first £10,000 is ignored. Once the amount starts to increase, they will be considered to have a “deemed income” of £1 per £500. There is no upper limit applied in this case.

Once the upper limit of £16,000 is reached, benefits are no longer applicable for such individuals.

Is My House Part Of Capital?

One’s home is considered to be the most important part of capital when budgeting is done by local councils to ascertain the amount to be contributed by the state. While the residential property owned by a claimant is considered as capital, however, in case their house is occupied by any of the following residents while the owner is in a care home facility, the premises may not qualify to be accounted for in a means test:

  • spouse/civil partner/unmarried partner
  • a close relative over 60 years of age
  • a close relative below 16 years of age (legal dependant)
  • former spouse pr partner if they are a single parent

This is called property disregard.

What Counts As Deprivation Of Assets?

When someone deliberately reduces their assets to increase their benefits claim, it is termed as “Deprivation of Assets”.

If the claimant is found to have (a) disposed of assets whether, through sale or gift to immediate family (b) without being able to prove intention other than avoidance of care home fees, this act will be classified as deprivation of assets.  

While most individuals consider that transfer of savings, selling of one’s property or gifting their home to a family member is all that counts as deprivation of assets, that is not all. Any of the following actions will be counted as deprivation of assets if it takes place within a short period of time prior to one’s claim for care home residency:

  • To give away a large sum of money
  • To transfer the title deed of one’s property
  • To spend a large amount of money which is in contrast with the spender’s usual spending pattern
  • To lose money through gambling 
  • To use savings in order to purchase items excluded from a means-test such as a car or jewellery

What Benefits Are Means-Tested?

Certain benefits, including Housing Benefit, are means-tested. This means that when the Department for Work and Pensions assesses individual cases, they take into consideration the financial status of the applicant is also taken into consideration to have a clear picture of their income and capital. Means-tested benefits include the following: 

  • Housing Benefit 
  • Pension Credit
  • Universal Credit 
  • Income Support 
  • Jobseeker’s Allowance 
  • Employment and Support Allowance 

What Is An Assets And Income Assessment?

Assets and income assessment is a means-based test conducted by local councils to calculate the scale of state benefits a claimant is eligible for. For this purpose, the income, savings and capital of the claimant will be taken into account.

State Benefits such as Attendance Allowance and Pension Credit will be counted as income. However, in the case of Disability Allowance, there will no accountability for the same.

To avoid deliberate deprivation of capital due to financial circumstances you can check the official benefits calculator to learn about the state benefits that you may be eligible for depending upon your personal situation.

How To Avoid Deprivation Of Capital For Care Home Fees?

In order to avoid deprivation of capital for care home fee payments, claimants may consider the option of Deferred Payment Agreement according to which the homeowner signs a formal agreement with their local council. The local council agrees to bear the entire care home expense of the claimant until they are ready to sell their house or the property is sold after the death of the claimant. 

Sometimes it is advisable for individuals on low income to consider their situation and make a decision whether they will be better off staying home and receiving care (as well as state benefits) or will they be taken care of better in a care home facility. In such cases, they may consider applying for any of the following options:

  • Attendance Allowance 
  • Personal Independence Payments

Attendance Allowance is a tax-free state benefit applicable to those individuals who have surpassed the state pension age and require supervision due to their health condition. It is aimed towards providing a monthly allowance to those individuals who need assistance with meeting the extra costs of a disability or the support of a carer due to old age.

PIP (Personal Independence Payment) is a benefit intended for people aged 16 years and above; aimed to cover the additional daily costs of living with a long-term disability or illness; be it a physical or mental health condition. It is gradually replacing DLA (Disability Living Allowance).


Deprivation of capital may easily be proven by local councils by tracing the dates of sale or transfer of personal property and confirming the intention of this sale. Once proven, deprivation of capital is enough to reduce or remove a claim on a range of state benefits for the claimant. 

Therefore, should one be claiming benefits or intending to file an application for them, it is best to consult your local council authorities to learn about the pros and cons of the transfer or sale of capital.

There are instances when such actions are inevitable and this is where the intention of the claimant is considered. If they are able to prove with evidence that they have used the proceeds from the sale of their capital to improve their living conditions or pay off a debt or even go on a holiday, such expenses will not be considered as deprivation of capital.

FAQs: What Can I Buy That Is Not Deprivation Of Capital?

What counts as deprivation of capital Universal Credit?

When someone claiming Universal Credit or applying to qualify for Universal Credit deliberately sells or transfers their capital to someone else with the sole intention of increasing the award of state benefits, it will be counted as deprivation of credit. Any income that is derived through savings, assets and investments counts as capital. Claimants for Universal Credit are eligible for full benefits if their capital is below £6,000 and the amount keeps decreasing as capital increases from £6,000 to £16,000. Anyone with capital above £16,000 does not qualify for Universal Credit.

Is buying a car deprivation of capital?

No, buying a car for personal use is not considered a deprivation of capital as long as there is evidence to prove that the intention of the buyer was to improve their living standards and not a deliberate reduction in capital to be awarded higher benefits.

Is buying a house classed as deprivation of capital?

No, buying a house that will serve as your personal residence will not be classed as deprivation of capital. However, if you were claiming benefits such as Housing Benefit or Income Based Employment Seeker’s Allowance, you may not be able to claim these benefits anymore due to a change in your personal circumstances. 

Does paying off mortgage count as deprivation of assets?

Deprivation of assets includes those deliberate actions that claimants of benefits of care home residency take so as to reduce their assets with the sole intention of being able to increase the amount of state benefits that they receive. Secondly, deprivation of assets generally takes into account a period of seven years between the reduction of assets and someone making a benefit claim. Therefore, if someone is paying off a mortgage, it will not be counted as deprivation of assets.

Does a gift of money affect your benefits UK?

No, a one time gift of money, rental property or personal property does not affect the state benefits that you receive in the UK. However, if the gift is in the form of an inheritance that is received as annual fixed income over a period of time, it may be counted as an increase in income. This may reduce the claimant’s benefits or deem them ineligible.


BP1 – Assessment of capital

Shelter Legal England – Treatment of capital in housing benefit calculations

How savings can affect benefits

Factsheet 17 – Housing Benefit

Housing Benefit: Other help with housing costs

Deprivation of assets | Social care means tests

Financial Assessment for Care Home Fees Explained – carehome.co.uk

Who Pays for What in 2021/22? – carehome.co.uk advice

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