Can’t I just spend the money?
Generally the answer is no. There is a 52 week disregard applied to personal injury damages to allow you to spend some or all of the money before your benefits are affected.
However, you should be careful to avoid anything which may be seen as you deliberately getting rid of money in order to retain your right to claim benefits. If you are found to have done this (such as spending money on a large holiday, or paying off debts) your entitlement to benefits will be affected even if you spend the damages money. Any benefits received will be recalculated to take into account the damages money and may result in you having to return money to the government!
If you are in receipt of benefits, the easiest way to avoid any of these problems is to set up a personal injury trust.