Millions of low-income households across the UK are set to benefit from a major change to Universal Credit, as new rules limiting benefit deductions come into effect today.
Under the updated Fair Repayment Rate, the maximum amount that can be deducted from Universal Credit payments to repay debts has been reduced from 25% to 15%.
The change is expected to give an average financial boost of £420 per year to around 1.2 million households, including 700,000 families with children.
The measure forms part of the Government’s wider Plan for Change aimed at improving living standards, strengthening financial stability, and ensuring benefits better support those in need.
The Department for Work and Pensions (DWP) confirmed the move was first announced in the Autumn Budget and is the first step in a comprehensive review of the Universal Credit system.
Currently, 2.8 million households see deductions from their monthly Universal Credit payments. The new lower deduction rate is designed to ensure that debt is still repaid, while allowing recipients to meet their essential daily costs without undue hardship.
Work and Pensions Secretary Liz Kendall said the change is a key part of the Government’s effort to help working people retain more of the benefits they’re entitled to.
She stated that this reform will strengthen financial security for households across the country and ensure that families have the support they need to move forward.
The Fair Repayment Rate joins a range of new initiatives under the Government’s Plan for Change. These include the Get Britain Working White Paper, which sets out ambitious targets to increase employment, modernise Jobcentres, and provide tailored job support and career services. A new youth guarantee is also being launched to support young people into work or training.
In parallel, the Household Support Fund has been extended with an additional £742 million to help struggling families manage essential costs. The Government is also taking action on child poverty by expanding free breakfast clubs to every primary school in England.
These combined efforts aim to create a more resilient welfare system while supporting vulnerable families and boosting the UK’s economic growth.
