Inheriting a house while receiving benefits can seem complicated. There are questions around whether you have to declare the house, if it will affect your benefits, and what to do if you want to sell the property. This article will provide quick answers to common questions and explain the key things to consider if you inherit a property while claiming benefits.
Quick answers
Do I have to declare an inherited house?
Yes, you must declare any change in your circumstances, including inheriting a property, to the benefits office handling your claim. This is important to avoid accusations of benefit fraud.
Will inheriting a house stop my benefits?
Not necessarily. Inheriting a property does not automatically disqualify you from receiving benefits. However, it may affect how much you receive depending on your benefits type.
Can I sell the inherited house?
Yes, you can sell an inherited property even if you are on benefits. However, you may have to reinvest some or all of the proceeds if you receive means-tested benefits.
Will I have to pay bedroom tax?
If the inherited house is bigger than you need for your household, you may become liable for bedroom tax (under-occupancy penalty) on your housing benefit.
Do I have to live in the inherited property?
No, you do not have to live in an inherited house and can continue residing in your current home if rented/leased.
How inheriting a house affects different benefits
The impact of inheriting a property on your benefits depends on whether you claim contributory or means-tested benefits. Here is how it affects some common types:
Universal Credit
Universal Credit is a means-tested benefit, so inheriting a property can reduce how much you receive. The property may count as capital above the £16,000 threshold and affect your entitlement. If you sell the house, you may have to reinvest some of the money.
Housing Benefit
Housing Benefit is also means-tested, so if inheriting pushes your capital over £16,000 it can reduce your payment. Under-occupancy rules may also apply if the inherited house is too big for your needs.
Council Tax Support
Council Tax Support counts inherited properties as capital, so if its value takes you over the capital limit it could reduce support. Even if not rented out, the property may be liable for council tax too.
Employment and Support Allowance (ESA)
Inheriting a property can affect ESA if you receive income-related ESA, but not if you only get contribution-based ESA. The house may count as capital and affect how much ESA you receive.
Jobseeker’s Allowance (JSA)
Like other means-tested benefits, inheriting a house can impact your entitlement to income-based JSA. It may push your capital over the £16,000 threshold. Selling the property could also affect your JSA if proceeds are reinvested.
Personal Independence Payment (PIP)
PIP is not means-tested, so inheriting a property does not affect your entitlement or how much you receive. However, you must still report the change in circumstances.
Disability Living Allowance (DLA)
Similar to PIP, inheriting a house does not affect your DLA claim. DLA is not means-tested, so capital/property ownership does not impact it.
In summary, inheriting a house only affects means-tested benefits by potentially taking your capital over the threshold. Contributory benefits like PIP and DLA are not affected at all.
Selling an inherited property
You can sell an inherited house while on benefits, but what happens with the money depends on your benefits type:
- For means-tested benefits, you may have to reinvest proceeds over £6,000 into other capital.
- For disability benefits like PIP and DLA, you can spend sale proceeds with no impact.
- Keep receipts/paperwork to show what you did with the money.
- Consult the benefits office before committing to sell an inherited property.
Some options for reinvesting sale proceeds from an inherited house on means-tested benefits:
- Purchase another property to live in.
- Invest in exempt assets like government bonds.
- Invest in stocks/shares through a special approved account.
- Deposit the money into a pension or other approved savings account.
Failure to properly reinvest and declare capital from selling an inherited property can lead to problems with your benefits claim in future. Always speak to the benefits office for advice.
Tax and legal implications
As well as benefits effects, inheriting a house can have tax and legal implications:
- You may need to pay inheritance tax if the estate value exceeds the threshold.
- Ongoing responsibilities like repairs and council tax payments.
- Capital Gains Tax if you later sell the inherited property.
- Family legal issues if others contest the will or inheritance.
Professional legal and financial advice is recommended when inheriting property. Most benefits offices can also offer guidance on how it will specifically affect your claim.
Renting out an inherited property
Instead of selling, you may consider renting out an inherited house while on benefits. The rental income may affect your benefits, but the property itself can be treated differently:
- Means-tested benefits – Rental income reduces benefit payments, but the property value is ignored after first 12 months.
- Contributory benefits – No effect as they are not income-related.
Points to consider when renting out an inherited property on benefits:
- Income over £20 per week reduces Universal Credit.
- You are liable for tax on rental profits after allowable expenses.
- Must be declared to benefits office to avoid accusations of fraud.
- Ongoing landlord responsibilities for maintenance, repairs etc.
- Make sure inherited property meets rental safety standards.
Generating income through renting out an inherited house can be complex on benefits. Get professional advice on finances and tax implications.
Benefits help available
If inheriting a house has caused uncertainty or problems with your benefits, don’t struggle alone. Free advice is available from:
- Your local housing office – for help with housing benefit and under-occupancy issues.
- Citizens Advice Bureau – for benefits checks and general guidance.
- Your local authority – many offer welfare assistance and benefits helplines.
- Online benefits calculators – to estimate entitlement impacts.
You should also contact your benefits office as soon as possible after inheriting property. They can help minimise disruption and ensure your claim stays valid.
What to do next
If you inherit a house while claiming benefits, here are important next steps:
- Inform the benefits office handling your claim about the change in circumstances.
- Seek professional advice on potential tax and legal implications.
- Discuss benefit impact and options for the property with your benefits office.
- Consider whether to live in, sell or rent out the inherited property.
- If selling or renting, take guidance on reinvesting proceeds and rental income declaration.
- Look into benefits help if the inheritance causes problems with your claim.
Inheriting property can be complex when on benefits, but support is available. Be proactive in informing officials, consider your options carefully and get professional advice where needed.
Conclusion
Inheriting a property does not automatically disqualify you from receiving benefits, but can have implications depending on your benefits type.
Means-tested benefits may be reduced if inheriting takes your capital over the £16,000 threshold. Contributory benefits are unaffected.
You can sell or rent out an inherited house, but proceeds or rental income may have to be declared and reinvested correctly.
Seek advice from your benefits office and independent financial/legal help when inheriting property. Act quickly to report any changes and ensure your claim stays valid.