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Will claiming personal injury compensation affect my benefits?

By Ian Morris | Updated July 12th, 2023

166 questions have been answered on this subject - ask us your question

If you currently receive state-funded benefits, such as Universal Credit or similar, making a claim for personal injury compensation could impact your benefits entitlement and the amount of benefit payment you receive. Means-tested benefits take into account income, savings and assets to assess your eligibility to claim. The current savings threshold at which means-tested benefits stop is £16,000, but any savings or compensation above £6,000 can affect the amount of benefits you can receive. This includes benefits like Universal Credit, housing benefit, and council tax support.

If you receive a compensation settlement exceeding the threshold, you must declare it as savings. But it’s impossible to determine precisely if your benefits claim would be affected unless you know how much compensation you’ll receive.

How much compensation will affect benefits like Universal Credit?

If you receive a compensation payment of over £6,000 for your injury, then this can affect your entitlement to receive Universal Credit and other benefits. However, many claims are settled for less than this amount.

For example, minor whiplash claims where an injury settles in 6-8 weeks would fall below this figure. If this was the case, a benefits claim would not be affected.

But in claims involving more severe injuries, the value will be maximised by an expert solicitor. Here, your settlement will be higher and push you beyond the income bracket for benefits claims, and you’ll likely see a reduction or loss of benefits.

Should you claim compensation if it affects your benefits?

In most cases, anyone injured in a non-fault accident should pursue their legal right to seek compensation regardless of any benefits they receive.

If you had a huge settlement of millions, it wouldn’t really matter if you lose your benefits. Where it is a problem is when people receive smaller settlements of, say, £10k or £20k. While it’s a lot of money, it’s not life changing and won’t last forever. Therefore, losing a chunk of or all of your benefits would be a real blow.

However, there are ways of mitigating the risk of a settlement affecting your benefits, and here at Direct2Compensation we can help you understand how to do this. You shouldn’t let concerns about losing benefits entitlements stop you from making your claim for compensation.

Our specialist solicitors can ensure that any compensation settlements have minimal impact on your existing or long-term benefits entitlements. In cases of larger settlement values, we can link you with specialist financial advisers to handle the compensation in the most tax-efficient way possible, such as creating a personal injury trust.

Use a personal injury trust fund to avoid losing benefits

A personal injury trust allows you to pursue the maximum compensation for your claim without jeopardising any means-tested benefits entitlements or missing out on any local authority care provisions. Compensation settlements paid into a trust are held separately from your finances, and the trustees control how the settlement is spent. This ensures that compensation settlements don’t count towards the savings threshold and don’t affect your benefits claim.

Our solicitors can help you appoint trustees who will have the claimant’s best interests at heart when authorising any release of trust funds. The trustees (one of which can be the claimant) will control the trust and how the compensation settlement within the trust can be spent.

It pays to be smart with your claim. Our solicitors will help you to ensure that you have access to the right advice and support so that any existing benefits claims are not affected unless the law requires them to be. Often they will advise that if you win your claim for compensation, you should agree to take a small settlement immediately (one that would not go above the maximum savings threshold) and that the rest should be placed in to a personal injury trust fund.

Let us help you start a claim

If you would like to find out a little more about how you could claim compensation after an accident and not lose your benefits entitlement, just drop us a line on 01225 430285, or if you prefer, . We’ve been helping claimants win compensation for over 28 years. We’re happy to discuss your circumstances in confidence and help you to better understand whether claiming compensation could have any undue effect on your existing benefits claim.

166 questions have been answered on this subject - ask us your question

Comments & Questions

Read on for questions and advice about claiming...

Would a compensation of £160,000 and another compensation of £10,000 affect benifit payments of rent, council tax, disability, daily living allowance, carers allowance, mobility car, child tax credit. It has been put into a family members account, is this fraud ?

You can’t ‘hide’ receipt of settlement legally and should definitely inform the appropriate authorities in due course. The safest and best course of action in this case would be for you to contact a local Solicitor to arrange to set up a personal injury trust as this would enable you to retain the settlement but without any impact on your rights to benefits and state support.

I currently have an ongoing compensation claim for occupational asthma due to formailn exposure. Am I still entitled to claim Industrial Injuries Disablement benefit? I work and don’t claim any other benefits. Would it affect my compensation claim as I believe it’s not means tested?

You should further investigate the potential to claim the benefit you mention, but it would be sensible to discuss this with your Solicitor prior to taking any formal action. If a claimant is in receipt of non-means tested benefits, their benefits entitlement is not impacted by their claim settlement.

Hi I received benefits esa income related and pip and others for myself and my husband we are both disabled. We had a car bump other car hit us and we are getting compensation my husband has been awarded £3k and mine will be around £5k we have debt of £4k to be paid straight off when we receivel the funds, how do I stand with the dwp this terrifies me to be honest once debt paid we will be nowhere near 6k in savings but I don’t know how dwp look at this it’s causing me such extreme anxiety could you advise me in simple terms fir dummies as its too confusing

As you will be under the £6k threshold, there should be no negative consequences to your benefits entitlement.

Will my award and my husbands award be added together as one as we have one claim for benefits ? Thank you so much

As you have a joint claim, we are not able to advise on this particular issue. We would suggest that you speak with the DWP or CAB for further specific advice on your benefits entitlement and your rights under such legislation.

Hi Ian,
My compensation claim for PI has just concluded with an ok result. I was claiming ESA (income based)and was paid it for 10mnths then it was stopped. I also claim PIP. CRU are claiming back £4000 ESA and £22,000 PIP.

My other concern is, that during my time of unemployment I had to draw down on my personal pension and my award does not cover the recovery of this.
Q1 Should I have queried this?
Q2 Can I claim mandatory reconciliation on my pay out?
Q3 Will I still be able to receive my PIP payment?

PS I am back in full time employment, but in a totally different field.

Many thanks in advance.

Kevin.

I would strongly advise you to return to the Solicitor who handled your claim to discuss the pension draw down you had to make and also to enquire if they can refer you to a financial specialist who can advise you in detail on your rights.

With regards to the PIP payment, my understanding of that is that it should not be subjected to means testing so that should be queried with the DWP and perhaps with the CAB too.

If I receive universal credit payments including housing benefit and i’am waiting to receive a settlement figure of £2000 from an accident that I had 2 yrs ago will this amount of money affect any universal credit that I receive also I own no property and I have no savings thankyou.

The amount you are expecting should have zero impact on any means tested benefits, including Universal Credit as you are below the threshold and do not have savings. However, we would always recommend that you disclose the settlement to your benefits handlers in order that you are seen to be fully open and honest regarding your financial situation.

Thank you Ian for your helpful reply.

You’re welcome!

Can I open a Compensation Injury bank account before I’ve received my compensation settlement, so that it’s ready to go straight in?

If you are to receive a sum of compensation that will exceed the threshold for means tested benefits, it is sensible to consider opening a personal injury trust. This can be done with most Solicitors and is a legitimate means of ensuring that any existing benefits entitlement is not impacted by receipt of compensation for injury or loss. You can open such a trust before receipt of compensation.

I am currently paying an attachment of earnings for housing benefit overpayment.
I am soon to be receiving £5,000 compensation from my work as conciliation due to malpractice, will any money be taken out of the compensation for the attachment of earnings? Thanks

We advise that you discuss this specific enquiry with a specialist organisation – such as the Citizens Advice Bureau as the fact that you are having to repay an overpayment could impact on your situation. However, as the amount of compensation that you mention is below the £6,000 threshold, you should be ok.

I have received PIP for nearly 5 years. I’m about to receive a compensation award for negligence. Please could you tell me if this will this affect my PIP? I was under the impression it wouldn’t as PIP isn’t means tested.

You are correct, PIP is not means tested and your settlement will not impact your PIP benefit entitlement.

Any means tested benefits may be impacted by a financial settlement – whether that be via a compensation claim, inheritance or even a lottery win.

Hello. I receive attendance allowance due to age and relative infirmity. I had a no fault motor accident and have received a provisional compensation offer which is >£10000. However DWP are seeking to claw back from this sum the attendance allowance value lve so far received. I don’t know whether they’ll seek to claw back further AA amounts. Can they claw back money for this non means tested allowance? Thanks

Benefits that are not means tested will remain in place regardless of the value of a settlement a claimant is awarded.

However, with benefits that are subjected to means testing, if a settlement takes a claimant beyond the threshold, they could lose some of their entitlement or see some benefits recovered. This is a matter that you need to discuss with your Solicitor and you may wish to seek advice from a financial planner to ensure that your benefits remain unaffected.

Would other compensation claims be able to be handled in the same manner as stated above? (Will claiming compensation affect my benefits claim?)

So would a payout for defamation through the small claims or a payout from the Police Force or NHS Trust, for example, affect benefits?

Also, could they be put directly into a trust?

Any income including settlement of a legal claim will need to be disclosed to the relevant authorities when it comes to claiming benefits. If the amount that you may receive will see you exceed the threshold and thus lose a benefits entitlement, it would be prudent to seek the advice of a financial planner and Solicitor to seek legal and legitimate ways of ensuring that benefits rights are not unduly impacted by receipt of settlement.

I had an accident at work due to faulty equipment 2 years ago and am disabled now and getting IIDB along with other benefits from UC for housing costs. My Solicitors have advised me that the compensation will be awarded after deducting the benefits that I have been paid already. Is that true? Please advise.

Your Solicitor should receive correspondence from the Department of Work & Pensions regarding what, if any amount of benefit payments you have received is to be recovered. It is the case that some benefits payments are recoverable from compensation settlements if a claimant succeeds with their case.

In your situation, it is sensible to discuss this matter with your Solicitor and to also ensure that any settlement you receive at the closure of your claim is held in such a way that it does not impact on your future benefits entitlements – such as a personal injury trust.

Hi. I’ve received £8.250 (after solicitors fees) in compensation.

I’m current on ESA (support group) and PIP but receive no other benefits and I have no savings.

Will my benefits be affected?

The amount of money you have received will need to be disclosed to the department of work and pensions. Your PIP benefits should be unaffected as they are not means tested, but ESA could be reduced a little.

Will a compensation payment of 6 thousand 6 hundred effect someone’s universal credit ?

Much will depend on whether the claimant has any savings or other income.

Hi, I’m wanting to set up a personal injury trust fund, what do i need to do to set it up and how much does it cost? thank you.

Setting up a personal injury trust is something the Solicitor you have used to pursue your claim should be able to assist you in doing. Essentially, you need to find a Solicitor who can assist in the setting up of a trust and you need to find a suitable and extremely reliable/trustworthy co-trustee (as you will be a trustee).

Thank you for the information you emailed me, I understand I still have a chance to claim, but I will probably need your help.
Earlier they promised me a medical expert and I am waiting until today. I don’t know what to do, maybe you as an expert could help me?

We advise that you allow the insurers to view your medical records and seek a referral to a medical expert. If the insurers then come back with a reasonable offer, that would be great. However, if they refuse to cooperate advise us and we’ll look in to this for you.

I was involved in a crash and I’m currently going through the claim now. It’s been over 2 years since the accident and I am at the stage where my solicitor is sending the deductions for DWP paperwork and I was wondering how long it will take from this stage to receive my claim?

It would appear that you are close to the end of the process and to receiving settlement. Do you know if an offer has been made by the defendant? If so, and if you’ve accepted the offer, settlement should be with you within a month or so.

If my personal injury claim is withdrawn or unsuccessful, can the DWP take any action to recover my benefits if I am receiving personal independence payment?

The DWP cannot recover any paid benefit that you have received if your claim for personal injury compensation is unsuccessful.

I won a claim against the NHS but the solicitors deducted all benefits paid from the date of negligence. This was for ESA and PIP to be paid back to DWP. The total wasn’t far short of half the money paid.
I can maybe understand ESA being paid back but PIP I thought was a given right to help with daily living.
Our solicitor has queried this with the DWP but the DWP haven’t responded in the months since.
Your thoughts would be appreciated.

The DWP can be difficult to deal with. In the majority of cases where a successful claimant is in receipt of PIP benefits, there is no requirement for PIP to be repaid to the DWP, but this is not always the case.

Can a trust fund be set up when the compensation is already in my bank account?

You may be able to establish a trust but you should act quickly to look in to this. You should approach your Solicitor to discuss the prospect of setting up a trust.

I have had my settlement award from cica and its going to have a big impact on my benefits can someone please give me some advice?

Were you represented by a Solicitor in your CICA claim? If so, you should contact them to ask whether they can help you to have the award placed in to a trust (personal injury trust) in order to ensure that your benefits entitlement is not impacted. If you did not have a Solicitor acting for you, please approach a local Solicitor to discuss having such a trust set up.