Will a compensation settlement affect my benefits claim?


If you currently receive state funded benefits, such as Jobseekers Allowance or similar, making a claim for personal injury compensation could affect the amount of benefits that you receive. Benefits claimants are only allowed a certain amount of savings or income before they would be deemed to have too much to claim full benefits, or even reduced benefits. Of course, unless you know how much personal injury compensation you will receive, it is impossible to answer exactly as to whether or not your benefits claim would be affected.

The amount of compensation

The majority of personal injury compensation settlements settle at a relatively low value of £3,000 or under. 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. However, in claims where the claimant has been more severely injured and the value of any claim has been maximised by an expert solicitor, a claimant would likely be pushed beyond the income bracket in which benefits claims are assessed.

Most people would think it is fair enough that if you become ‘wealthy’, even if via the misfortune of having to claim compensation for an injury, that you should no longer get benefits – they are, after all, for people on hard times. However, if you had a huge settlement of millions, it wouldn’t really matter. Where it is a problem is when people receive smaller settlements of say £10k or £20k. Whilst 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.

Seek advice for your particular situation

Anyone injured in a non-fault accident should pursue their legal right to seek compensation regardless of any benefits they receive. At Direct2Compensation, we can help you to understand whether claiming compensation could have any undue effect on your existing benefits claim. We are able to link you with specialist financial advisers in order that any larger settlement values can be handled in the most tax efficient way, and where possible in ways that do not disrupt or damage any existing claim for benefits.

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 send us your details via the contact page, we’ll be happy to discuss your circumstances in confidence and help you to better understand your situation.

Be smart with your claim

We don’t feel that it is fair that a personal injury claimant has to sacrifice an existing income in order to obtain compensation for the injuries that they sustained, unless of course, a claim value is extremely high and the level of damages paid out would take care of all future requirements of the injured claimant for the rest of their life.

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 trust fund. This would allow you to receive a small amount every year so that you can retain your existing benefit payments whilst enjoying your settlement for longer.

The UK Government website has more information on how benefits are affected by compensation claims. If you are concerned about a claim affecting your benefits, you shouldn’t let it stop you from claiming what you are entitled to.

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  1. Hi I have been awarded 11000 compensation due to a sexual incident .. I’m worried cos I claim house benefit tax cred and carers allowance. I do not want to go over what I’m allowed and scared now to claim this compensation

    • It is important to remember that you are being awarded compensation due to having suffered emotionally and physically, especially given the nature of the incident that lead you to making your claim.

      If you have been represented by a Solicitor, they should be able to assist you with regards to making sure that your award is paid to you in such a way that it falls below the required threshold for disclosing the settlement sum to the benefits authorities. If you have acted independently and made a claim without representation, you should make contact with your Citizens Advice Bureau to discuss the settlement and how you can minimise any loss of benefits entitlements. Of course, you should disclose the sum to the authorities at the appropriate time, but not before you have sought advice.

      The whole point of compensation is to ‘compensate’ you – the victim of an upsetting incident. For that compensation to then see you lose any benefits entitlement (even if short-term), would then effectively see you not being compensated fairly.

  2. Good evening iam getting p.l.p and industry injury payments. I would like some information regarding about payout. Will it affect my payout thank you

    • Most benefits are means tested and as such, receiving large lump sums of compensation can have an impact on certain benefit entitlements. With this in mind, Solicitors that do settle claims for claimants that receive benefits will be able to discuss with their client as to the best way to avoid impact on benefits entitlements. In most cases, this will see a claimant receive a portion of their settlement initially and then have the rest placed in a trust fund that will enable them to draw down an annuity annually that will remain below the income level that would impact on their benefits.

  3. I will shortly be receiving a compensation one off payment for harm (£10K) from my local authority while in their care as a child. I am age 60 and in receipt of ESA/PIP/HB and CTAX benefit. Will I have to declare this compensation to the DWP or will my compensation payment be exempt when it is paid.

    • You should declare any payment – although it is often done automatically anyway. The value of your settlement shouldn’t impact on your existing benefits entitlement but your Solicitor or legal representative should be able to link you to an appropriate financial advisor who can ensure that your settlement is paid to you in a way that doesn’t damage your existing position.

  4. Hi, I receive PIP and ESA benefits, I was in a road traffic accident a few months ago and I’ve now been giving an offer of £2200, my solicitor takes 15% of that so that leaves me with just under £2000, will any of my benefits be affected? I was on benefits before the accident (I wasn’t claiming benefits because of the accident)

    I’ve also read about a trust fund, will I need this even though the road traffic accident claim is a small amount? Will I also need to inform the DWP of my successful claim?

    • With a settlement of that value, it is unlikely that you will have anything to worry about. You should double check with your Solicitor, but my view is that you need not be concerned.

  5. Hi my daughter received £22,000 compensation for sexual abuse. She lived with her partner at the time and they are now separated. She has none of the money left, will she be able to claim benefits. She has 2 children

  6. I don’t get any benefits only child tax credit and Carers allowance Child benefit I have got my renewal form from the tax credits do I have to tell them how much money I have in the bank as got compensation from a accident in 2013

    • It is important to disclose any requested details to HMRC and the tax credits authorities, but it is unlikely that your compensation settlement will have an impact on child tax credit and carers allowance benefit.

  7. I am on cont.based e.s.a, p.i.p,my partner claims housing benefit and council tax benefit. I have been awarded £42,500 from a personal dust related industrial injury. Can you tell me if my,or partners benefits will be affected?

    • If you receive the settlement as a lump sum payment of £42,500 it could have an impact on your benefits entitlements. We would recommend that you speak with the citizens advice bureau and also ask your Solicitor to link you up with a financial planner in order that you minimise any impact that this settlement will have on your benefits.

  8. hi my mother had a fall at home due to work done by contractors and is due a compensation claim, she will receive after the solicitors have taken there fee just over £3000, do you know if this will effect her benefits, the solicitors have sent her something about putting the money in a trust but to do this she will have to pay out of the money another £650 so will leave her even less can you help, i was wondering if i could be a trustee for her.

    • Danny

      Thank you for visiting our website.

      Compensation settlements for previous/past losses and injuries are not deemed to be taxable income and I would therefore doubt that any such payment of £3000 to your mother would have an impact on her benefits claim – although I would stress that all financial sums held by a benefits claimant ought to be disclosed.

      In claims for compensation, the only sum that can be deemed as taxable would be the element of the settlement that provided for lost income that would usually have been taxed at the point of earning if one is a PAYE worker or via a self-assessment return for a self-employed worker. This would also apply to future loss of income if a claimant was left unable to work for a considerable time after the settlement were awarded.

        • Danny

          I would say that at the level of compensation that you expect to receive and given the proposed cost of the trust fund, it is not really worth going down that route.

          Your Mothers Solicitor should be able to put you in touch with wealth management people who can offer best advice regarding how to protect a settlement value in the best way. Such discussions should not cost you – particularly when you are simply finding out what proposals or offers the financial people can make.

          Yours sincerely


  9. Hi I had a fall at work 5 months ago since then I have had lots pain in my back legs I am still at work but am struggling to do my job if I left would I be able to claim esa I am also a career as I have an disabled adult son

    • Toni

      If you are forced to leave work on medical grounds, make sure you receive written evidence to support this requirement from your GP as any future benefits claim will require evidence to support the fact that you can no longer work.

      You may also be entitled to claim compensation for the injuries after the accident at work. You may be able to make a claim against the employer for the fall that you had and I would be interested in speaking with you about this. One of the great benefits of pursuing a claim for compensation is that you can not only look to receive compensation for the injuries, but also get rehabilitation therapies (such as physiotherapy or even surgery) provided at the expense of the 3rd party.

      In your case, whether or not you have a viable claim against your employer will depend on what caused your fall and whether or not the employer would be held responsible for your fall.

      Please email your contact number to me at: ian@direct2compensation.co.uk and I’ll call you so that we can have a discussion about your accident and I can then offer some advice as to your rights going forward.

      I look forward to hearing from you.

      Yours sincerely

      Ian Morris

  10. Hi,

    I had new radiators put in by council sub contractors a few months ago. Twice one of them have leaked but the second time it completely flooded my home. (All floors sofas, skirtings, wallpaper and decoration) the assessor is coming round today to make a note of all damages, take pictures etc and they have already took full responsibility for the damage. The company will pay for everything damaged and I’m guessing the agreed amount will be paid into my account so I can replace what was damaged. My question is will this payment affect my benefits? Even though it will only be to pay for what was ruined. I am currently on income support and housing benefit and child tax credit.


    • Stacy

      Hi, thank you for visiting our website.

      Your situation is not a personal injury claim one, so it’s hard for us to assist. However, what you describe regarding the loss/damage of your personal possessions as a result of water damage, sounds like a straight forward home insurance claim. Of course, in this case there is a contractor and it is (I assume) their insurers who are going to replace your losses.

      In this case, I would think it likely that your items will be replaced on a like-for-like basis as most insurers like to work this way. As such, you may not receive any cash settlement whatsoever and instead have every item replaced with a brand new one. However, if the insures opt to make you a settlement offer and pay you in cash (these days likely to be a bank transfer), I can’t see how that would affect any benefits claims you may make as the settlement is simply to enable you to replace the items that have been lost.

  11. I am about to receive 10.5k in compensation for an accident I had 3 years ago.
    I was made redundant last september and when I claimed I was put on ESA, It is Income related due to my partner being on the same claim and I have just been put in a support group (not work related)
    I have no other savings.

    I have 2 questions.

    Would I have to pay back the ESA I have already received?

    Will my benefits change?

    Sorry I am just worried as i’m already struggling to pay my mortgage as it is.

    Thanks in advance.

    • Jo

      It is very difficult for us to give advice in this situation as we don’t know the full details of your situation or the nature of your compensation settlement.

      I would strongly suggest that you take advice from the Citizen’s Advice Bureau and also speak to your Solicitor. In most cases, your Solicitor should be able to refer you to a financial planner who will be able to ensure that any settlements you receive are received in the most tax efficient manner.

      I hope that this helps.

  12. I got large payout ten years ago but now on pension age small pension can I get pension credit or will my compensation left reduce my claim I have 35 grand left

    • Liz

      Given your situation, it would be best for you to seek the specialist advice of a chartered financial planner or go and speak with the Citizens Advice Bureau as they will be best placed to properly assist and guide you.

      Yours sincerely


  13. I am currently receiving universal credit and due a large settlement within the next few months. Will i have to pay back the benefit i have received out of my settlement?

    • Patricia

      This is a complex ‘issue’ to explain and very difficult to do properly by way of a comment without knowing the full details. What I can say is that if you are receiving benefits to enable you to live as a result of being unable to work, your Solicitor will be able to help you find the most efficient legal ways to receive your settlement without it having an undue effect on your benefit payments.

      Clearly, the compensation you will receive should be compensation rather than simply to replace benefits. However, if you have over a certain threshold of money, your benefits can be reduced or removed. To this end, Solicitors can help you look at ways of having the settlement paid in to a trust fund or similar so that you can receive some of the money at first, then the remainder in installments so that it doesn’t impact on your usual benefits receipts. Of course, each case is different and as such, I would strongly recommend that you speak with your Solicitor – who knows the full facts of your situation and settlement amount – to get specific advice that will aid you with the way you opt to handle your settlement.

      I hope this helps.

      Yours sincerely


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