Universal Credit and benefit changes revealed in the Budget
THE Chancellor has announced several changes in her Autumn Statement that will affect people on benefits and Universal Credit.
Rachel Reeves unveiled the government’s financial plan for spending and tax today in the commons.
As part of her speech Ms Reeves unveiled a raft of changes including a state pension boost, tobacco tax hikes and a 1p cut to the price of a pint.
The Chancellor also revealed several boosts for those on benefits including a payments increase and the extension of the Help to Save scheme.
She also confirmed she would lower the cap on the maximum level of deductions that can be taken from a person’s benefit payments.
In a bid to get more people signed up for pension credit, the Chancellor also announced it would be combining the administration of two key benefits.
Below we reveal the biggest Universal Credit and benefits changes that will affect you and your finances.
Payments increase
From next April, benefits claimants will see payments rise by 1.7%, making it a significantly lower boost than in previous years.
Ms Reeves said: “This commitment means that while working-age benefits will be uprated in line with CPI, at 1.7% the basic and new State Pension will be uprated by 4.1% in 2025-26.”
That is because the rise is based on September’s inflation figure in a process known as “uprating”.
The following benefits are also legally required to increase each April in line with the previous September’s rate of inflation:
- Personal independence payment (PIP)
- Disability living allowance
- Attendance allowance
- Incapacity benefit
- Severe disablement allowance
- Industrial injuries benefit
- Carer’s allowance
- Additional state pension
- Guardian’s allowance
We have rounded up all the benefits increasing and how much by here.
Carer’s allowance
An extra 60,000 carers will be able to claim government cash after changes announced in today’s Budget.
Ms Reeves said she will raise the limit people can earn before being ineligible for the carers allowance from £151 a week to £181.
The current earnings cap of £151 a week after income, national insurance and expenses has been criticised as far too low.
It has seen many selfless carers unknowingly bust the limit and later told to repay large sums of their benefits.
The Sun first revealed the changes were expected at the Budget last week – and it was welcomed by campaigners.
Helen Walker, Chief Executive of Carers UK, said: “We found 4 in 10 unpaid carers were pushed out of work because of problems with the earnings limit, plunging many into poverty.
“This new measure will help many more unpaid carers up and down the country to stay in paid work, putting much-needed finances into families’ pockets.”
Help to Save
The government also confirmed in its Budget documents, released today, that it will extend its Help to Save scheme by two years until April 2027.
The little-known savings account gives people on benefits, including Universal Credit and Working Tax Credit, a bonus of 50p for every pound they save, up to a maximum bonus of £1,200.
All savings are secure as the scheme is backed by the government.
The government is also extending the scheme so all Universal Credit claimants who work are eligible.
Previously, you, or you and your partner, must have earned £722.45 or more from paid work in your last monthly assessment period to qualify.
It has launched a consultation today into how it will deliver the “reformed and improved” version of the scheme.
In the Statement documents, it said: “The government will extend the current Help to Save scheme until 5 April 2027.
“With effect from 6 April 2025, eligibility will be extended to all Universal Credit claimants who are in work.
“A delivery consultation, including details of a reformed and improved scheme, has been published alongside the Budget.”
BRITAIN’S MOST MEMORABLE BUDGETS
Today is the first Labour budget for 14 years – and the first ever to be delivered by a female Chancellor.
Brits are bracing for a raft of tax hikes as Rachel Reeves tries to plug the “£22billion black hole” she says she’s found in government accounts.
Here are five other budgets which have caused a stir over the years.
1979 – Geoffrey Howe, Conservative
Margaret Thatcher’s Chancellor Geoffrey Howe slashed both the top rate of income tax and the standard rate.
He also doubled VAT – shifting the tax burden from income to consumption in a huge change for Brits.
Howe also eased controls on foreign exchange in a bid to control inflation.
The budget signalled a massive break from the last Labour government and set the pattern for decades to come.
1988 – Nigel Lawson, Conservative
Nigel Lawson (dad to domestic goddess Nigella) massively slashed income tax again.
The deputy Commons speaker twice cleared the chamber amid noisy protests from Labour MPs slamming the tax cuts.
Lawson also set off a property bonanza by announcing an end to double mortgage tax relief for couples buying homes.
1993 – Norman Lamont, Conservative
In March 1993 the economy was still reeling from Black Wednesday, when the pound crashed out of the European exchange rate mechanism.
Lamont announced tax rises including VAT on domestic gas and electricity.
Later that year Lamont’s successor Ken Clarke froze personal tax allowance and brought in stealth taxes on insurance and plane passengers.
The Lamont and Clarke budgets marked the end of the Tories’s scything tax cuts – and set the stage for Labour’s return to office in 1997.
2002 – Gordon Brown, Labour
Brown raised national insurance by a penny on the pound to fund higher spending on the NHS.
The future PM had fretted over a possible backlash from voters who had re-elected Labour in 2001.
But he managed to pull off the largest rise in health spending in the history of the NHS.
2009 – Alistair Darling, Labour
Labour’s last budget before today came amid the credit crunch and soaring unemployment.
Darling ramped up taxes and borrowing in a bid to fill up draining Treasury coffers.
Tory leader David Cameron blasted Labour’s ‘utter mess’ – and was in power a year later.
2022 – Kwasi Kwarteng, Conservative
Kwarteng unveiled his economic package less than a month after becoming Liz Truss’s Chancellor.
Technically, it was a fiscal statement rather than a budget – but it turned out to be just as seismic.
Rising Tory star Kwarteng announced £45billion in tax cuts including a drop in all rates of income tax.
Markets took frights and the pound went into freefall before the Bank of England waded in to stop a run on UK pension funds.
Mortgage rates soared and Kwarteng was out of the job just three weeks later.
Housing benefit and pension credit
Through digging through the documents, The Sun also found that in a bid to increase pension credit take up – the government will be actively writing to housing benefit claimants encouraging them to apply for pension credit to.
The government has been working to maximise pension credit take up, particularly since it became one of the key benefits that can get the Winter Fuel Payment.
In the Budget documents, it said: “There has been a significant increase in Pension Credit claims following the announcement to target Winter Fuel Payments.
“The government is optimising the use of Housing Benefit data and individuals applying for Housing Benefit from Spring 2025 will be proactively encouraged to apply for Pension Credit.”
The government is contacting 120,000 pensioners currently in receipt of housing benefit inviting them to claim pension credit too.
It will also be bringing together the administration of the two benefits for new claimants from 2026.
This is two years earlier than previously announced and aims to support more people to receive the benefits that they are entitled to.
New Fair Repayment Rate
Ms Reeves has confirmed she will lower the cap on the maximum level of deductions that can be taken from a person’s benefit payments.
Addressing Parliament, Reeves said: “I can today announce that we are introducing a new Fair Repayment Rate to reduce the level of debt repayments that can be taken from a household’s Universal Credit payment each month from 25% to 15% of their standard allowance.
“This means that 1.2 million of the poorest households will keep more of their award each month lifting children out of poverty and those who benefit will gain an average of £420 a year.”
The Department for Work and Pensions can deduct money from a Universal Credit claimant’s allowance to help them pay back debt.
These can cover a range of debts, such as benefit advances, overpayments of child tax credits, rent and council tax areas, as well as outstanding water and utility bills.
Under previous rules, the DWP and third parties could deduct up to 25% of a claimant’s standard allowance to help manage their debt repayments.
But this has now been capped at 15% in efforts to help some of the worse-off homes across the UK pay off what they owe over a longer period.
The measure known as the Fair Repayment Rate will come into effect next April.
WATCH RACHEL REEVES ON NEVER MIND THE BALLOTS
By Ryan Sabey, Deputy Political Editor
RACHEL Reeves will be grilled in a special Budget edition of The Sun’s Never Mind The Ballots show today.
Our Political Editor Harry Cole will put the Chancellor on the spot shortly after she’s finished delivering her crucial address in the House of Commons.
It will be available to watch on thesun.co.uk, YouTube and Sun social channels at 5.30pm.
Topics will include her decision on whether to spare motorists a fuel duty rise, and the expected eye-watering tax rises she will impose.
Since its launch earlier this year, NMTB has cemented its place at the heart of British politics.
During the General Election campaign The Sun was the only print publisher to host back-to-back grillings of Rishi Sunak and Sir Keir Starmer.
Footage from The Election Showdown has been viewed over 15 million times.
NMTB has also featured interviews with ex-PMs Boris Johnson and Liz Truss, as well as senior politicians Nigel Farage, James Cleverly, Wes Streeting, Steve Reed and Bridget Phillipson
Surplus earnings threshold extended
Universal Credit claimants will continue to get the higher surplus earnings threshold of £2,500 until March 2026.
Surplus earnings are taken into account in your next monthly assessment period for Universal Credit.
For example, if your monthly earnings are more than £2,500 over where your payment stopped – the current threshold – this becomes “surplus earnings”.
These surplus earnings are then carried forward to the following month, where they count towards your earnings.
If your regular income and surplus earnings are then still over the amount where your payment stops, your Universal Credit payment will be affected.
Move to Universal Credit
The government also confirmed in the Budget documents, that it is speeding up the move for those on Employment and Support Allowance (ESA) claimants onto UC.
It said it brought the start date forward from 2028 to September 2024.
The documents read: “This move will bring more people into a modern benefit regime, continuing to ensure they are supported to look for and move into work.
“Around half of ESA claimants will receive more financial support on UC, while others will receive transitional protection to ensure nobody is worse off at the point at which they move over to UC.”
Everything you need to know about Universal Credit
- What is Universal Credit? Everything you need to know including how to apply
- Universal Credit calculator: How much can I claim and how do I apply?
- Universal Credit login: How do I sign in to my online account?
- How much can I earn before Universal Credit is reduced and do I get a work allowance?
- What is a Universal Credit advance payment? How to apply and pay it back
- Are Universal Credit payments going up and how much more will I get?
- How to claim Universal Credit if you’re self-employed
- How many hours can I work on Universal Credit and will my payment be reduced?
- What is a Universal Credit budgeting advance and how much could I get?
- What is the Universal Credit housing element and how much of your rent does it pay?
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