The intention is that the treatment of capital will be similar to that under Income Support and other means tested benefits currently. Capital below a certain level will be fully disregarded and there will be a notional income from capital above that amount.
Where a claimant has capital above a certain level, they will not be entitled to Universal Credit.
This seems a reasonable way to carry forward existing rules, although the notional interest rate is absurdly high.
The cut-off point in most benefits today is £16,000. Above that amount and there is no entitlement to benefits (there are exceptions for the elderly).
In Tax Credits today there is no such concept as a cut-off or notional interest. Real income from capital is used in the same way as for tax.
When those getting tax credits, with more than £16,000 in capital, claim Universal Credit they’ll find that they’re not entitled to it. That’s estimated by the Social Market Foundation to be 400, 000 families with a further 200,000 hit by the notional interest rules.
ps. The new Housing Credit for the elderly is going to have a capital cut-off too.