The Effects Of Receiving Personal Injury Compensation On Your Welfare Benefits Entitlement

Discover how your solicitor will typically pay your compensation at the end of an accident claim; the welfare benefits entitlement criteria that might be affected by the receipt of compensation and how to ensure that personal injury compensation does not effect your benefit entitlement.

How do you receive your compensation payment at the end of your personal injury claim?

Typically, at the end of your claim (subject to any agreed deductions) your solicitor will pay you your personal injury compensation by way of a cheque.

Payment of this cheque into your account might influence your benefits’ entitlement – depending on the type of benefits you receive and the government entitlement assessment criteria.

What welfare benefits entitlement might be affected by receipt of compensation?

Type of benefits you receive

There are many different criteria for assessing your entitlement to benefits, which will largely depend on the type of benefits you receive.

Income and savings level

Some will restrict your benefits if your income levels are over a certain amount. Others will be affected if you have savings over a certain value. Yet others may combine both income and savings.

Check the government website for specific benefits entitlement criteria

To know the current entitlement criteria for your benefit – you can go to the government website by clicking UK benefits entitlement.

On the government site type into the search box your benefits name and on the relevant webpage that shows click on the eligibility link at the top of the page.

Is personal injury compensation classed as an income or a saving?

Compensation not an income

Personal injury compensation is not considered an income and as such is not subject to tax.

Money derived from compensation

Watch out – money derived from the compensation could be considered an income.

Taxing of compensation payments

See our detailed article about whether compensation payments are taxable in which we discuss the tax implications of receiving a compensation payment.

Compensation held in your account may be a saving

Clearly a personal injury payment for damages has not been saved, but so far as the government entitlement criteria is concerned – monies held in your account whatsoever the source is likely to be considered as savings.

What should you do if there is a risk your welfare benefits may be affected?

Check your welfare benefit entitlement criteria

You should check to see what the entitlement criteria for your benefits are.

For example – if there is a savings criteria of £12,000 and your claim is worth £3,000 – you do not need to be concerned.

Let your personal injury solicitor know your concerns

If, however, your personal injury compensation is likely to be substantial you should let your solicitor know your concerns at the beginning of your claim and remind your solicitor as your claim approaches settlement.

Mechanisms your solicitor can use to ensure benefits are unaffected

There are different mechanisms for larger claims that can be put in place to ensure benefit entitlement is not affected or minimised.

The government when setting criteria for benefit entitlement cannot envisage all unknowns, such as the unlikely event of a large personal compensation payment. It would not be their intention to penalise you when you suffer injury – yet still such payments might automatically affect your benefits for the reasons already explained.

It is therefore totally legitimate to consider how a better structure for receipt of your compensation monies can be set up to ensure that benefits are still received.

For example – your solicitor in combination with independent advice from a financial advisor, could help with the setup of a trust fund. In this way the full compensation payment is not paid directly into your account, but the money is held in trust for your benefit.

Here the benefit of your personal injury compensation and the ownership are kept separate, so the personal injury compensation money will not be seen as savings.

Should you still claim compensation if you are worried your benefits may be affected?

Right to claim compensation for personal injury

If you have suffered injury in an accident and someone else is legally at fault – you have a right to claim compensation for personal injury whether you are receiving benefits or not.

Waiting too long and missing time period to claim

Many Claimants are fearful of the effect of personal injury compensation on their benefits and so do not claim or hesitate so long that they fall foul of the 3 year statutory limitation (making it too late to claim even if they should change their mind).

You should make your claim

My personal view is – if you have a claim for personal injury you should always make the claim irrespective of your benefits entitlement concerns.

In most cases – your compensation will be at a level that your benefits will not be affected.

In cases when your compensation proves to be substantial – your solicitor can help with ensuring a structure is put in place that will allow you to continue to receive your benefits or limit the effect on them.

Summary Of Personal Injury Compensation And Welfare Benefits

In this article you have seen how personal injury compensation might affect your benefits entitlement; why you should still claim if you are concerned and how your solicitor can help set up a structure to separate the ownership and benefits of your compensation using a trust fund to protect your benefits entitlement.