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Will Getting Personal Injury Compensation Affect My Benefits Claim?

By Ian Morris | Updated August 13th, 2024

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

Quick Answer: Receiving a personal injury compensation settlement can potentially impact your entitlement to means-tested benefits. However, there are ways to mitigate this impact, such as setting up a personal injury trust.

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 payments you receive.

Below we’ll explain the potential impacts, the thresholds you need to be aware of, and strategies to protect your benefits while still pursuing fair compensation.

How Compensation Can Affect Benefits

Understanding the potential impact of a compensation settlement on your benefits is important for making informed decisions about your claim and financial future. The relationship between compensation and benefits is complex and depends on various factors, including the type of benefits you receive and the amount of compensation awarded.

Universal Credit and Other Means-Tested Benefits

Compensation settlements can affect means-tested benefits, which include:

Universal Credit
Income-based Jobseeker’s Allowance
Income-related Employment and Support Allowance
Income Support
Housing Benefit
Council Tax Support

Current Thresholds

As of 2023, the key thresholds to be aware of are:

£6,000: If your savings (including compensation) exceed this amount, it may affect the amount of benefits you receive.
£16,000: If your savings exceed this amount, you may lose entitlement to means-tested benefits altogether.

Non-Means-Tested Benefits

Some benefits are not affected by compensation settlements, including:

Personal Independence Payment (PIP)
Disability Living Allowance (DLA)
Attendance Allowance
Child Benefit

Understanding the Impact

If you receive a compensation settlement exceeding the £6,000 threshold, you must declare it as savings. However, it’s impossible to determine if your benefits claim would be affected until you know how much compensation you’ll receive.

Compensation Under £6,000

If your compensation settlement is less than £6,000, it generally won’t affect your benefits. For example, a minor whiplash claim settling within 6-8 weeks would typically fall below this threshold.

Compensation Between £6,000 and £16,000

Settlements in this range may reduce your benefit entitlements. The DWP assumes you have an income of £1 per week for every £250 of savings between £6,000 and £16,000.

Compensation Over £16,000

If your settlement exceeds £16,000, you may lose entitlement to means-tested benefits until your savings fall below this threshold.

Should You Claim Compensation if it Reduces 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.

Strategies to Protect Your Benefits

It pays to be smart with your claim. Our solicitors will help you to ensure that any existing benefits are unaffected unless the law requires them to be. There are several strategies that can employed:

1. Personal Injury Trusts

A personal injury trust is a legal arrangement that can protect your compensation from being considered as savings for benefits purposes. Key points:

The compensation is held separately from your personal finances
Trustees control how the money is spent
The funds in the trust don’t count towards the savings threshold for benefits
You can be a trustee of your own trust, along with other appointed trustees

Often our solicitors 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.

2. Spend-Down Strategy

In some cases, it may be appropriate to use your compensation to pay off debts or make necessary purchases before it affects your benefits. However, this should be done carefully and with professional advice.

3. Staged Payments

For larger settlements, it may be possible to arrange for the compensation to be paid in stages, keeping the amount you receive at any one time below the relevant thresholds.

The Importance of Professional Advice

Given the complexities involved, it’s worth seeking professional advice if you’re concerned about how a compensation settlement might affect your benefits. Consider:

Consulting with a welfare rights advisor
Discussing options with your personal injury solicitor
Seeking advice from a financial planner experienced in personal injury trusts

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.

Reporting Your Compensation

Remember, you have a legal obligation to inform the relevant benefits authorities about any change in your financial circumstances, including receiving a compensation settlement. Failure to do so could be considered benefit fraud.

Let Us Help You Start a Claim

While receiving a compensation settlement can potentially impact your benefits, there are strategies available to protect both your compensation and your benefits entitlement. The key is to plan ahead and seek expert advice to ensure you make informed decisions about your finances and your future.

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.

Frequently Asked Questions

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

Comments & Questions

Read on for questions and advice about claiming...

Hi There my mum is 74 was involved in an RTA as a passenger on a bus, the bus company’s insurance compensated my mum for haven broken her left arm and shattering her right shoulder leaving her now with a replacement shoulder and deformed wrist She received £20000 compensation, will this affect my mums entitlement to Housing Benifit , council tax and her pension credit?

In situations like this, it’s vitally important that your Mother gets specialist advice from a Solicitor with expertise on personal injury trusts and financial planning. The whole point of compensation is to compensate someone who has been through a traumatic incident. If the individual who receives compensation, then lost entitlement to other rights or financial income streams such as means tested benefits, the receipt of compensation would be pointless.

In your Mothers case, receiving £20k will take her over the threshold for means tested benefits, so she does need to take action. If a trust can be set up, your Mother can receive her settlement and still retain her full benefits entitlement.

I had a accident in 2018 it has left me disabled I can not get any help with this I have autism and ADHD and dyslexia so find it very overwhelming and don’t really understand I went to my local gym and came home and ended up with the wet room and a mobility car its unfair as the lady at the gym filled out the paperwork told me wear to sign she didn’t explain anything I have so much more to add
Please can anyone help me please

Sadly it would seem that you are statute barred as your claim would need to be made within 3 years of the date of your accident.

What do i need to do to make sure my benefits are not affected by a personal injury compensation claim from when i was in the USA

Has the money in question been paid in to a UK account? It is important that you do not try to hide any financial resources from the authorities and we would recommend that you speak to a specialist in personal injury trusts to ensure that you are not in breach of any regulations or acting fraudulently.

I know someone who is due to receive £92,000 in compensation from the CICA. For the death of her partner. She gets universal credit/means-tested benefits. How can she best protect this money for her and her family?.

The value of the settlement that you are discussing indicates that the recipient should obtain specialist advice from the right people. In terms of the settlement and making sure that it does not impact any means tested benefits entitlement (which includes Universal Credit) will be to set up a personal injury trust.

Although we do not directly set up or ‘sell’ personal injury trust services, we can provide the details of a specialist who can assist with such issues. alternatively, a quick online search via the Law Society ‘Find a Solicitor’ service should help.

Hi wondered if u can help me ,I got a compensation payout of 36,000 pounds ,I was currently on benefits as operation left me unable to work ,dwp took 20,000 pounds of it cus they said I had to pay back every penny that I had received from time I claimed up to the payout ,
Is this actually right pls?
I can’t receive phonecalls at the moment but I can receive emails ,so b good to talk over email
Look forward to discussing this
Hope u can help .
Thanks

The Department of Work & Pensions (DWP) Compensation Recovery Unit (CRU) can legally recover costs from a personal injury settlement if someone has claimed benefits such as employment support or some disability benefits because of an injury. The law allows the DWP CRU to recover costts from a claimant for any state benefits paid to a claimant.

When an injured person has received state benefits due to an injury, the benefits paid are to support that person financially during their recovery. If someone who has received state benefits goes on to succeed with their claim for personal injury compensation, the CRU can recover the costs of the benefits received, as those benefits were intended to cover the claimants lost income – which the received settlement should have included.

If you had a Solicitor acting in this matter, you should discuss this with them. If the settlement you received included a sum on top of the claim for your injury value and other losses for the benefits you received, it is likely that the CRU have acted correctly as you cannot be paid twice as it were – you can’t receive wages and claim lost wages – the same as not claiming for the lost income that any benefits would have covered. If you were not provided with loss of income (in this case a sum to cover the benefits received), you could well recover that sum.

If a claim for loss of earnings is made, can PIP payment be counted against income when settlement is made. ie if you were earning £2000pcm net and PIP is £500, can the defendant pay £1500, or must they pay £2000 and ignore the PIP payment?

PIP would be received regardless of income (as we understand it) as it is not a means tested benefit, so your loss of income should be recovered in full regardless of any PIP receipts that you receive.

I had a fall in a pothole outside my council disabled bungalow in the 11th May this year and broke my elbow,I had surgery on it on the 23rd May. I can’t straighten my arm and seeing physio and also have nerve damage. I do have a solicitor fighting my case against the council,she said I could be awarded £25,000 . Both myself and my husband are on pip , ESA, HOUSING BENEFIT. I am concerned that the compensation would effect our benefits drastic. Which is the best way to prevent this happening?

You should certainly proceed with your claim, but being aware of the potential impact on any means tested benefits entitlements if you don’t take the appropriate steps is really sensible and important.

If you were to receive a settlement of the value that you have mentioned, it would likely impact any means tested benefits, but only if you just receive it and have it in a bank account. The sensible course of action – and your Solicitor should be able to assist you in arranging this – is to take the appropriate steps to set up a Personal Injury Trust and have any settlement placed in to the trust. This enables you to use the funds but without it being counted as savings or financial income that may be considered when calculating what benefits you may receive.

Of course, you don’t need to set up the trust at this stage as you don’t yet know whether you’ll succeed with the claim or what the final settlement value would be, but you should discuss this with your Solicitor in order to gauge whether they can assist you with this (most Solicitors will have a go-to contact or a department within their firm who can assist you) or if you’ll need to find a specialist provider of such products.

Hi, im currently going through the process of claiming compensation for a medical negligence case,

I have been claiming pip in the meantime,

Does this mean i cannot get compensation now?

Your PIP claim will have no negative bearing on the outcome of your claim for clinical negligence compensation or your right to make such a claim.

If you succeed with your claim, you may need to consider setting up a personal injury trust to ensure that your settlement doesn’t impact your existing or future benefits entitlement. If you succeed and your settlement exceeds the threshold at which means tested benefits are impacted (potentially seeing any benefits allowance reduced or even stopped) setting up a personal injury trust will ensure that you can still retain the compensation settlement as well as your existing benefits entitlement.

Good afternoon, I’ve been told the pip claim which includes care will affect the care costs side of the claim and I can’t effectively make two claims for care!

And the defendant can withhold any money I’ve received already from pip!

Claimants cannot ‘double claim’ for costs and if you have received benefits that cover or contribute to some losses, you cannot then claim those losses again – only any shortfall or lost income.

You can however, still pursue your claim.

Can my council request or demand that I pay my rent arrears from my personal injury Trust account?

When money is held in trust, no persons other than the trustees can direct any spend of those monies.

Daughter was ran down when aged 12 took 6 yrs to come through .
Struggling to find personal injury Trustee so worried she will loose everything.
Plz any advice .
She is on pip etc for her disabilities .
Is there a company who can help

We must start our response by advising that we are not specialists or experts in finance or state benefits. However, PIP should not be means tested and any benefits that are not means tested should not be impacted by any settlement.

We do not set up personal injury trusts, but we can provide details of a specialist firm with whom we work who are able to assist in such matters.

I get compensation for an injury after a car crashed into a mine on a pedestrian crossing. Do I have to inform Universal Credit and will it affect my benefits?

Whether or not any means tested benefits – such as universal credit – are affected by a compensation settlement will depend on the amount of compensation received.

You should certainly inform the relevant authorities.

I have been offered £9000 personal injury from a car accident by the other persons insurance comoany but that is above the £6000 limit savings on universal credit which I claim. If i set up a pi trust it will cost £1000 to do, so I wonder if it is worth it or just ask for £6000 to keep under the limit. I don’t know whst I would be allowed to spend the money on if it was in a trust or the hassle of uc reducing my benefits until the savings are below £6000 and what they would say I could spend it on. I have a solicitors appt but they will all charge for a chat. I am also strugging to find a bank that will open a trust account. The only one currently is metro bank and they charge £150 to open and £5 per month

Your Solicitor should be able to link you with a specialist who can ensure that you can receive the maximum amount of compensation possible, yet not see any means tested benefits affected.

Do you have any debts?

Hi sorry for asking but am in a similar situation. I’m due a pay out for medical negligence, it isn’t finalised yet, have won my case but still waiting for a settlement we can both agree on. I have a really bad credit rating and going struggle even opening an account, and am going to open a trustee account so that my benefits aren’t affected – but not really sure how it works?

Your personal financial credit rating should have no bearing on whether or not you can open a personal injury trust to ensure that you don’t lose any existing benefits entitlement. Although we do not directly handle personal injury trusts, if you email us at justice@direct2compensation.co.uk to request information, we can provide you with the details of a specialist in such matters who would be able to advise you appropriately.

Hi I am a carer for someone that has just been awarded £103,000 from the CICA. She is on benefits and as I understand she has a 52 week grace period to decide what she wants to do with the money. I have contacted univeral credit on her behalf explaining the situation and they have dismissed this totally telling me I don’t know what I’m talking about. The judge in the case, her barrister, the cica legacy manager and her own bank have all advised her that indeed she has 52 weeks to decide what to do. So far she has paid a chunk of existing debt off but she wants to put the rest into a personal injury trust. Again the DWP has turned around and said she can’t do that and continue to claim benefit’s. I have told them to consult the legal department, which they have to do by law anyway but the advisor turned aggressive and repeated I don’t know what I’m talking about and all I get out of them is the £16,000 threshold. They are being really quite horrible with what they have put in her journal to the point where they have accused her of fraud. We have done everything legally required about declaring the award so it feels like we are being bullied into her signing off. Am I right about the 52 week grace period or is it me in the wrong. Cheers.

Our understanding echoes that of the Judge, Barrister, CICA handler and bank that you reference. Perhaps a complaint to Universal Credit regarding the attitude and handling of the person who you have spoken to would be a justified move?

I have the same issue as Lee but my trust fund account is already set up & still DWP refuse to award me benefits they keep taking the trust money into account which my solicitors say they should not as they helped set up the trust fund for me I have appealed, complained but I am not getting where? It’s been 5 years I am without benefits & live off PIP

Have you involved your MP in this situation? What you are describing does not sound correct or legal – if your PI trust has been set up correctly and is being used/managed correctly, there is no way that any existing benefits entitlement should be withheld.

I have an open RTA claim, but the DWP have just added a bill for the benefits money I have received since the accident. I have Solicitors acting for me on this since March 2019 and I am really worried about what is happening.

I am in receipt of universal credit and I’m still trying to get a back payment from the date of the RTA. I am living on my overdraft but over my overdraft limit and getting daily charges now from the Bank again.

I just started getting PIP payments – the standard pay for mobility related issues. My universal credit claim knew I was in an RTA on the 08/03/2019 and would not accept my Doctors sick notes. They refused to help me and I was getting paid roughly £280 a month to live on and somehow still pay for my house and bills! I have just managed to get a back payment from August 2021 after having MRI scans on my spine. I have damaged the cervical spine and also have nerve damage. I have had 2 full spine MRI scans after 2 different spine surgeons requested them. My Doctors have told me that I can’t work or lift anything because it’s serious and I am worried about the claim for my spine damage.

Why is the DWP taking money from my claim? I do not understand and I do not understand my Solicitors and they don’t seem to be helping me right now. I do not know what to do. I’m confused and depressed and I’m on strongest medication the Doctors can give me. I did not get the first MRI scan until August 2021 because of the lockdown and because Doctors gave me a dangerous mix of drugs that made me ill (severe stomach pain and memory loss). I thought my Solicitors would be helping me but I am worried and do not understand any of this or know what do I should do.

I am struggling with everything, I live alone and can hardly move or get dressed. I am worried about losing benefit money. My brain feels broken! I need help please.

Your Solicitors really should explain the meaning of the DWPs correspondence to you. The correspondence will be from the DWP’s ‘Compensation Recovery Unit’ (CRU) who are able to claim against any aspect of your claim that includes settlement for loss of earnings and/or care claims.

As an example, if the certificate from the CRU lists £10k in recoverable benefits (as in this was the total amount that they had paid out due to your claim) but there was no loss of earnings claim or care claim, your Solicitor would simply appeal the certificate. The whole purpose of the CRU’s correspondence is designed to prevent a claimant from receiving ‘double recovery’ of lost income/care costs as well as having already received state benefits for those costs (ie you can’t receive loss of earnings AND benefits). This is not a claim against the settlement value of your case, but against any special damages element of the settlement (lost wages/care costs).

Your Solicitor will also have to look at the prognosis for your injury/recovery. If a medical report stated that there was an expected six month injury recovery, but the CRU were claiming for two years of (valid) benefits – again, your Solicitor would appeal on the basis that only six months are attributable to the accident.

In many cases, if there are benefits to recover from settlement, the defendant often pays those and then compensates the claimant. However, in some cases the whole settlement is sent to the claimant and any aspect of special damages that are recoverable can then be deducted at the conclusion of the claim, with the balance of settlement for injury and any further loss of income etc passed to the claimant.

Hi I’ve just made a claim through my travel insurance for ‘total permanent disability’ following an accident. The amount payable is a fixed amount of £10,000 and isn’t broken down into categories such as care, loss of earnings etc. I am not in receipt of any means tested benefits but do receive PIP because of the injuries I sustained. Will DWP expect repayment?

PIP should not be means tested and as such, you should not face any reduction of your PIP payments due to receipt of settlement in this case based on the information provided.

Hi there. I am asking this question for my brother who suffers from mental health issues. He is being paid a compensation by the Home Office who unlawfully detained him. Could we set up a Personal Injury Trust for him to put the compensation funds into? Or does PI trust only apply to personal injuries sustained through work or other accidents? And if it is possible to get PI trust for him, would this be enough for the DWP as he is on UC due to the his mental health issues?

Personal Injury trusts are usually specifically for personal injury settlements. However, the principle remains the same and it should be possible for your Brother to have any settlement paid in to trust in order that he does not lose benefits entitlement.

My solicitor has put in a valuation on my claim for my injury that happened to me 4 months ago. I’m waiting to hear back from the CRU of the DWP to see if the valuation is accepted, or if they will reduce it. Will it affect my benefits as I receive ESA (joint claim with my husband) PIP (daily living) Child Tax Credit Carers Allowance (husband receives that) and also Child Benefit? If so do I need to phone them up and say to them as I don’t want my benefits all mucked up if this happens.

I don’t want the compensation to go into a personal injury trust I want it to go into my bank account as I have a main one that my benefits go into and another bank that the compensation can go into.

It is vital that you don’t attempt to ‘hide’ any potential settlement from the relevant authorities and there are legitimate ways of ensuring that benefits entitlements are not impacted by receiving a personal injury settlement. Some of the benefits that you receive – PIP and Child Benefit are not means tested, so they would not be relevant in this consideration. Regarding the other benefits, much will depend on what income you already have (if any) and whether you have any savings and what level of settlement you may receive.

The best course of action is to discuss this with your Solicitor ahead of receipt of any settlement and you may also wish to speak with the Citizens Advice Bureau too for specialist advice in this area.

Hi I am receiving pip and industrial injury payments, I am waiting for a settlement figure for loosing 2 fingers, When i get the settlement would i have to pay them payments all back. Many thanks Ken.

Has your Solicitor received any correspondence from the Department of Work & Pensions (DWP)? The DWP Compensation Recovery Unit (CRU) should write to your Solicitor to advise as to what, if any element of received benefits will be recovered should you succeed with your claim.

I am due a payout out of 230k and have been advised to open a personal injury Trust account because I claim universal credit. I have been told that I can get this paid into my normal account then take out what I want to use/pay bills etc and put the rest into a trust within 52 weeks of opening the account and that way it won’t affect my universal???

You should contact a Solicitor to make the arrangements for your personal injury trust at the earliest opportunity.

A taxi driver subcontracted by NHS Hospital Transport tipped me off the ramp into his cab, in my wheelchair and broke my wrist. This means I can’t push myself around for 4 weeks and will need extra support at home.
I’m on ESA, Housing Benefit, Council Tax Support and PIP.
Should I sue in Small claims court to stay under the threshold for losing benefits if I were to win?

It is clear that you are in position to pursue a claim for personal injury compensation as the cause of your injury can certainly be attributed to negligence. Whether you choose to pursue the matter independently, or instruct a specialist Solicitor (which would be our recommendation) is a question for you.

As you are in receipt of vital benefits payments, it is prudent to be aware of a potential impact on means tested benefits from receiving a personal injury settlement. However, unless you already have savings and a settlement would push you over the threshold (which is around £6k at this time), your benefits would be unaffected. Of course, we do not know the severity of your wrist fracture but you have indicated that it will prevent you from being independent and using your wheelchair without assistance for 4 weeks. With this in mind, I would not anticipate that your claim would exceed the threshold and we would recommend that you instruct a specialist Solicitor to pursue this matter for you.

We are in receipt of benefits (universal credit). My husband received a settlement pay out for injuries which was over £60k. This settlement has been put in a personal injury trust and the Solicitors have already paid back any due benefit amounts to the relevant authority.

We are still on benefits at the moment as my husband still cannot work. Do we need to we need to present any other documents to universal credit or let them know of the trust?

Thank you, for letting know.

You only need to disclose details of any immediately accessible ‘liquid’ finances – such as those within your usual bank account or of any savings you have. The value within the personal injury trust does not need to be disclosed.