Young people who spent years saving for a deposit on a house have been ruled out of financial support during the coronavirus pandemic, forcing them to burn through the cash they spent years setting aside.

In some cases, people who saved for more than a decade will now see their nest eggs evaporate because of the way the government’s Universal Credit scheme works.

Anyone with savings over £16,000 is not eligible for Universal Credit, and people with savings above £6,000 are expected to use them to top up payments. In parts of the UK you could need up to £80,000 just to put down a deposit on an average home. 

Helena Adams, 29, moved from London to South Wales in 2019 to start an events and hospitality business.

The pandemic has seen all her scheduled work cancelled and because she is self-employed, she does not qualify for furlough, nor the self-employed income support scheme, because her start date meant she missed the deadline.

She told HuffPost UK: “Essentially I am one of those people who fell through the cracks on government support. I can’t claim Universal Credit because I’ve been saving up for a house deposit meaning I now have capital over £16,000.

“Now, for me, that is the result of 10 years of scrimping and saving.”

Adams lives in rented accommodation and points out the landlord who owns the property has been able to claim a mortgage holiday, while continuing to collect full rent from her.

She said: “If I’d managed to save up more money and I’d got a mortgage I would have got Universal Credit because my funds would no longer be liquid.

“Or alternatively, if I hadn’t done that and I had spent my money in much more fun ways like nights out and holidays, then I would have received Universal Credit. So essentially the system is punishing me for being financially responsible. I may as well have enjoyed my 20s more than I did.”

In 2020, the average house price for a property in England was £262,175. As of October, the most expensive area to buy a home was Kensington and Chelsea in west London, where the average cost was £1.3m. The cheapest was Burnley, where the average cost was £93,000.

It’s technically possible to get a mortgage with a deposit of 5% of a property’s value, though in the current market you might need as much as 10% or 15% due to the withdrawal of many low-deposit deals related to the impact of Covid-19.

Sara Willcocks, head of external affairs at charity Turn2us, said: “Millions of us who have lost our incomes in the pandemic are being denied vital support through our social security system due to having savings that are deemed too high. However, the government is failing to see this within the precarious context of life-changing events and the current economic climate.

“People may have been saving to put a deposit down for a house, or received a one-off redundancy payment having lost their jobs and income, while some are not eligible for anything simply because they live with a person who does have savings. 

“Furthermore, the current threshold limit is so low that people who have been saving for years may run out of money within a matter of just a few months.

“We urge the government to immediately review the capital threshold for our social security net, so people aren’t forced to erode their financial resilience in order to put food on the table and keep a roof over their head.”

The threshold is also affecting people who lose their jobs and receive redundancy payouts as the government also considers these as capital.

The charity estimates that, between August and October last year, more than 350,000 people were made redundant, with many individuals who had been saving for years finding their payouts tipped them over the Universal Credit threshold, meaning they are not entitled to any financial support.

Adams has now switched her business from event catering to home deliveries, but is having to dip into her savings to stay afloat.

She said: “This involves me driving around in a 17-year-old hatchback with 120,000 miles on the clock that I borrowed from my dad. That brings in some money, but the margins on home delivery are even lower than you would get doing single serve portions. And there are higher costs associated – for instance, petrol, and my insurance on the car is over £1,000 a year. Meanwhile the car is only worth £750.”

Adams says the situation has left her feeling as if she is “sliding backwards.” And she fears that being a dog-owner in a rental market makes her situation all the more precarious.

“Many landlords won’t take animals so I pay over the odds to accommodate the dog, who needs a garden.

“If I got evicted, the fact I own a dog and don’t have a stable income mean my chances of finding another private rental would be slim to none. That’s another reason why I need to be able to put down a deposit and buy somewhere. I have a genuine fear that if I got evicted I could very well end up homeless because no other private landlord would want to rent to me.”

A 35-year-old TV and film freelancer, who has asked to remain anonymous, had been saving for a house deposit for six years when the pandemic hit.

The hours can be long and the nature of the work is traditionally unstable, particularly in the current climate.

Of the £55,000 he had saved, half has now been spent keeping himself afloat after being excluded from Universal Credit.

He told HuffPost UK: “I sacrificed going to friends’ weddings, birthdays. I missed some of my nieces and nephews’ Christenings and missed all of their first birthdays because I was working and didn’t feel I could take the time off. 

“I did the right thing and declared my house deposit during my phone interview with my Universal Credit advisor. She instantly cancelled my claim and said I’m entitled to nothing.”

He estimates he has paid around £100,000 in tax in the decade he’s been in England. 

He said: “Rishi Sunak should be locked up for his intentional exclusion of three million UK tax payers. Hundreds of thousands of us are PAYE freelancers who are self-employed in theory but are PAYE in tax terms. 

“So we have no access to furlough and we’ve no access to SEISS [self-employment income support scheme] because we’ve paid our tax at source already. 

“I won’t buy a house in the UK after this. It was already a distant dream with extortionate housing prices but now after being treated so poorly by this government it has cemented my decision. I contributed, and when I really needed equal support, I was penalised for trying to build a safety net by building a housing deposit. It was used against me.”