More than a million households are set to benefit from changes to Universal Credit deductions, saving an average of £420 per year from April 2024.
The Department for Work and Pensions (DWP) has confirmed a significant reduction in the maximum amount that can be deducted from claimants’ standard allowance.
The changes will affect approximately 1.2 million households across the UK who currently have money deducted from their benefits to repay various debts.
This reform comes alongside a broader 1.7 percent increase in benefit payments scheduled for April next year.
The DWP currently can deduct up to 25 percent from Universal Credit payments to help claimants repay various debts.
These deductions cover benefit advances, historical overpayments of child tax credits, rent and council tax arrears, as well as outstanding water and utility bills.
The DWP currently can deduct up to 25 percent from Universal Credit payments to help claimants repay various debts
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From April 2024, this maximum deduction rate will be reduced to 15 percent of the standard allowance.
The change will allow benefit recipients to keep more of their monthly payments whilst spreading debt repayments over a longer period.
The reform aims to provide additional support for households struggling with rising living costs.
Work and Pensions Minister Alison McGovern said: “We are introducing a Fair Repayment Rate for deductions made from a Universal Credit award, allowing customers to prioritise their most severe third-party debts and retain more of their benefit award to budget for essentials.”
McGovern confirmed that “reducing the cap to 15 percent will benefit 1.2 million households by £420 per annum on average.”
The new Fair Repayment Rate system aims to help claimants better manage their essential expenses while maintaining debt repayments.
Under the new rates coming into effect from April 2024, Universal Credit standard allowances will increase by 1.7 percent.
Single claimants under 25 will receive £316.98 per month. Those aged 25 and over will get £400.14 monthly.
For couples where both claimants are under 25, the monthly standard allowance will rise to £497.55. Couples aged 25 and over will receive £628.10 per month.
Under the new 15 percent cap, monthly repayment limits will be strictly controlled.
Single claimants under 25 will have repayments limited to £47.55 per month. For those aged 25 and over, the maximum monthly deduction will be £60.03.
Couples under 25 claiming jointly will see repayments capped at £74.64 monthly. Joint claimants aged 25 and over will have a maximum monthly deduction of £94.22.
The changes are expected to provide significant support for families across the UK.
Single parents could receive up to £39 more of their entitlement each month, while two-parent families may keep up to £62 extra.
Chancellor Rachel Reeves highlighted the move would mean “1.2 million of the poorest households would keep more of their award each month, lifting children out of poverty”.
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