Home
» Claims FAQ
» Will compensation affect my benefits?

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...

last year i received a large medical negligence out of court settlement of 500k. After solicitors fees and repayment to private health insurers i received just over 450k. I am currently in the process of purchasing a bungalow to help with ongoing mobility issues and to relieve the financial burden of a mortgage as my health is not expected to improve. Three years ago i had to reduce my working hours to part time due to my health issues. Like many I am currently working from home. My employers have been very supportive but are unable to allow me to reduce my hours further and work from home on a permanent basis. We have entered discussions regarding their terminating my employment due to ill health capability. My question is if most of my compensation is spent on purchasing my bungalow and i am laid off work due to ill health would my having been awarded compensation in the past effect any future benefits i may be entitled to. Thank you.

It is unlikely that any previous settlement payments (once the property is purchased), will negatively impact any benefits entitlement. There is a savings threshold at which some benefits are not available, so it will depend on what financial situation you are left in post the purchase of the property.

I have just received a settlement for personal injury for 20k after deductions ongoing over the last 2 years How if any will it effect my Attendance allowance which started over the last 3 months The insurance claim for the injuries is not what i claim AA for , I understand AA is not means tested Do i need to inform DWP

Although the attendance allowance is not a means tested benefit, it is always sensible to discuss any benefits entitlements and financial situation changes with the DWP.

Hi I have been in a car crash which was not my fault I haven’t done any injury claim yet but I will as my left hand was dislocated badly and had about 4 inches long fracture resulting me having surgery and had plate and screws in my arm. I am expecting more than £6000 which can affect my universal credit so my question is after getting my compensation if I use that amount in deposit for buying my first house straight away, will it affect my universal credit claim and if it will how much it will affect? thanks

A Solicitor will help you to ensure that any settlement that is above the threshold of benefits entitlements is received in such a way that it does not impact your benefits rights.

Hi. I’m about to receive £9,500 cost care of personal injuries. Should I be contacting the Dwp as I get help from universal credit.
Thanks.

It is always sensible and correct to contact the DWP when your finances change – even if due to the receipt of a compensation settlement. However, before you do contact DWP, it is sensible to speak with your Solicitor about your settlement and the options available to you.

I am a single mother with 2 children and will soon be receiving a lump sum of £50,000 plus. I am claiming universal credits and council tax reduction. I am considering a trust however I really don’t know how to go about it. Also how do trusts work? Will I be able to access my money when I need to?

Your Solicitor should be able to assist you in the process of setting up a trust for your settlement, ensuring that you retain the maximum initial lump sum (so as not to impact your benefits entitlement). If you have a good relationship with the Solicitor who has handled the claim for you, you can appoint them as a trustee. If you don’t have a Solicitor, you should make an initial free consultation appointment with a Solicitor to discuss setting up the trust and they will guide you through the process and cost.

Once the trust is set up, the trust – of which you can be a trustee – will control the funds within the trust and can release them accordingly for items of need and living costs etc.

I am anticipating receiving around 10k in compensation I have 10k of debt if I pay off my debt does this count towards savings?

If you can demonstrate your debt and evidence that you are settling the same, it should not cause you any problems with regards to thresholds.

My mother is due to receive about 14k compensation for an accident at work (after lawyers fees), she sometimes recieves universal credit to top up her earnings, but is not currently recieving them. However this is money that she owes me, so she was going to pay me directly after she banks it. Will this effect her universal credit in the future? Does she have to declare that the money was there even if it will be out of her account again straight away?

It is always sensible to make sure that the benefits authorities are fully aware of any money coming in or out of a claimants account. In this situation, I don’t believe the settlement would have any impact on her entitlement and she should not be concerned.

Hi I got awarded compensation through the courts for the sum of £56.000 my solicitor said I had to pay back esa £2000 out of that then once he took all his fees and expenses I didn’t receive a penny, should I have payed esa the £2000 if I didn’t receive any of the compensation?

Until you have formally ‘banked’ your settlement, you are not in receipt of funds, so would not have to repay the benefits authorities until you have the funds in your bank.

Hi thank you for the reply, as my solicitor already payed the benefit department and then took the rest of my compensation for himself have I got grounds to ask benefits for the money back?
Kind regards

Your situation seems unusual and it is one we would recommend that you discuss with both the benefits office and also with the regulators covering the Solicitors in question – the Solicitors Regulatory Authority and Legal Ombudsman Service so that an independent review of the costs charged to you by your Solicitor can be undertaken.

I’ve been told I would receive £25,000 for the injury I sustained. However after Solictor fees and premium fee I will receive a total of £10,170. I’m currently on Universal credit with the limited capability to work meaning I’m unable to work I also receive pip, council tax reduction and school meals for my children . How will these all be affected by my personal injury award . I spoke to financial advisor through my Solictor’s however they said a personal injury trust fund isn’t right for me and not to have one . I have no savings at all so this lump some of £10,170 will be all I have. I was told by the financial advisor that I have. 52 week grace period and because I need to buy some things for the house to help with my disability due to my accident and that I’d be paying for private physio that I would more than likely be under the £6,000 saving threshold before the 52 week grace period finished and just to save all my receipts for big items purchases. I’m really worried and don’t know what to do as last thing I want is to have to use the lump sum award to be used for daily cost of living, rent etc and not for things that may help improve my disability I’m left with or make it a little more comfortable at home for. I need to get new flooring. As the one I have currently is dangerous with my new disability and causes me to have a couple of accidents, also some purchases of a mattress and some aids for walking and a sofa that is easier for me to sit down on and easier for me to stand back up again And private physio as I never received physiotherapy from nhs like I was meant to. Do I just have to keep Receipts for the amount that exceeds the £6000 and what are my options with this . I’m really worried and don’t want to be in the same position I was after my accident please can you share some advise

The advice you have received appears to be correct in that once you fall below the £6k threshold, any Universal Credit entitlement will not be impacted.

Hi there, I was in a car accident almost
3 years ago and I’m just about to get my settlement. It’s almost £8000 but the layers are taking their 20% before paying me the rest. I think I’m going to be paid about £6135.

I’m on working tax credits and child tax credits and really don’t want to be put onto universal credit automatically. I don’t know if this payment will trigger it?

Around £500 of the money is reimbursement for the car seat I had in the accident and the chiropractor I went to afterwards. Almost £900 is for CBT therapy for anxiety I was recommended get but haven’t booked yet due to not having the funds yet.

Will the DWP see this as I got £8k savings despite the fact £2k went to the lawyer and about £1.5K is for refunds/future medical treatment?

Of course, you should always be open and honest with the DWP regarding your financial situation. However, in your case you appear to be under the £16k threshold if you include savings and settlement, so you should be ok.

Hi was in a car accident in 2014 that resulted in me needing spinal fusion. I was awarded a settlement for £40,000 and I put that in a personal injury trust. I used that money towards a deposit on a house.
Unfortunately I had serious fall in 2017 that wasn’t my fault and it resulted in another surgery to my neck and because of this I ended up being medically retired from work. I’ve recently been awarded £20,000 and I’ve been told I can put it into my existing personal injury trust providing I’ve got a copy of my solicitors letter to support the injury compensation. Is this correct? I’ve got to pay back any sick pay I received but I’ve not been made aware I’d have to pay back any existing benefits I’m receiving. Do you think I would?

If your settlement is placed in to trust, the value of the settlement should not be seen as your own personal finance and that should not impact on any benefits that you currently receive.

I am in receipt of ESA and DLA benefits. I have recently won compensation of £30 000. Which benefit department do I report this too. Do I have a year to invest this without my benefits being stopped. thanks. Sarah

Did you have a Solicitor acting for you in your claim? If so, they should be able to assist you with setting up a trust to ensure that any impact to your benefits entitlement is mitigated.

In terms of declaring the compensation, you should contact the Department for Work and Pensions.

I had a injury some time back which has left me permanently disabled. I applied for and received a personal independence payment (PIP) to assist with mobility and care and continue to do so. Recently after several years I have managed to get an injury payment from those who did not treat my injury adequately. I am told that this payment would be subject to CRU payment – i.e. payment of benefits received. I am confused as to why this payment needs to be made, because I will continue to receive the PIP award going forward.

Is this correct, am I liable to payback the PIP from date of first received to injury payment especially when my understanding is that the PIP has been awarded due to my mobility and care needs which will continue and potentially increase as I get older?

Much will depend on the amount of compensation you will receive and whether that money is paid directly to you or placed in a trust. Before you accept the settlement, you should seek specialist advice via your Solicitor or a financial planner as it would be worth delaying receipt of the payment to ensure that you can minimise the impact on any benefits entitlements or the requirement to reimburse the DWP.

Hi I am due a compensation from CICA which is £16,000 and would like to now if this will effect my benfits

Before you receive settlement, we would advise that you discuss the potential impact of a settlement of such an amount on your benefits entitlement with a specialist organisation such as the Citizens Advice Bureau. If you used a Solicitor to help you with your CICA claim, they will be able to help you with this. Alternatively, the CICA should also be able to offer you advice.

Hi, my mother has received a total of £8900 for a crash she was in. However, she claims PIP, income support and child tax credit. Is there a way around them not stopping her benefits?

Solicitors should be mindful of the potential impact on benefits entitlement that a settlement in a claim for personal injury can present. There are legal ways around the impact on entitlement including placing some of the settlement in trust etc. Your Mothers Solicitor should be able to link her to a specialist advisor who can help her in this area.

Hi I have been putting off going for a claim after I cut a tendon in my finger in an accident at work. I have had surgery to fix it, but the surgery didn’t work as well as hoped, so my finger now doesn’t move properly. I delayed making a claim as my partner said that her benefits would be affected as she doesn’t work.

Whilst benefits entitlements can be impacted by receipt of a compensation settlement, there are legitimate ways in which a claimant can mitigate the loss of any benefits and specialist Solicitors can assist successful claimants to obtain specialist advice and support in cases where a claim value may impact on benefits rights. However, in your case you have sustained a permanent injury that will impact on your dexterity and close motor-skills for the rest of your life and the impact that such an injury could have on your ability to work properly and earn as much as you may otherwise have earned surely outweighs whether or not your partners benefits rights are entitled! Our article on finger injuries will give you more information.

Given the injury you have sustained, our view is that not attempting to pursue a claim is a short-sighted move and one you may well end up regretting if you allow your claim limitation period to expire.

I have just had a payout for an injury and was wondering if it affect my universal credit pay, the amount was £1000.

The amount you mention is unlikely to impact on your universal credit payments and your rights under that scheme.

I am currently receiving benefits for 4 yrs for my loss of earnings and not being able to work due to a hammer beating that severely caused my business to collapse and become immobile. I have a solicitor who is no win no fee but I’m so worried she says that I will have to pay back all of my compensation well most of it at least £60,000 of it. I have a loss of earnings claim and personal injury claim with this sols. I am on (mortgage payments interest only ) with mortgage holding off until claim comes through, I also receive PIP,ESA , my main worry and concern is that whilst I’m claiming if its true what she implies about benefits being deducted is this from loss of earning only or P I Claim? I live alone am worried I’m wasting my time if I then pay all the money back and still loose my home and concerned why my sols has not mentioned a personal injury trust that I have been told about that could protect my claim and benefits from being taken leaving me penniless.

It is true that benefits entitlements can be altered by receipt of a compensation settlement. However, your Solicitor should be able to assist you with wealth management advice as to legal ways of receiving your settlement in such a way that it does not reduce your benefits entitlement and allows you to receive settlement in a way that prevents you from losing out.

Hello I currently receive universal credit and I’m due a cheque for £1,077.90 in 2 days do I need to declare this?

We would always recommend that any compensation settlement or other income is declared to the benefits office in order to ensure that no restrictions are broken or breached. It is likely that your compensation will not impact on your benefits entitlement in anyway.

I was injured in an RTA Oct 18. I have had numerous scans and tests. MRI shows legion to left ankle, which is quite painful and has caused weakness and buckling. I am in receipt of ESA due to severe arthritis of right hip. Can I set up a Trust? how much are the fees?

If you have a Solicitor acting for you in your claim for personal injury compensation, they will be able to link you with a qualified financial planner or advisor who would be able to assist you in minimising the impact of any settlement on any benefits entitlements, including setting up a trust or making appropriate investments.

The costs of such services is not something we can advise on, but it would be wise for you to investigate such avenues.

I’m on esa support group and on pip but had a car accident the other day, am thinking of claiming whiplash injuries, do i have to tell the DWP about any compensation i receive? it is about 3000 a claim or less.

The reality is that your claim would not be of a sufficient value for you to have to disclose any settlement to the DWP. However, a specialist Solicitor would ensure that you were made aware of your rights and obligations and that if the settlement were to exceed any benefits threshold, that appropriate action was taken to ensure that you could receive settlement in such a way that the impact on your benefits entitlements was minimised within the law.

We can help you with your claim for whiplash.