DWP benefits increase each year in line with inflation
One of the major decisions that was confirmed at the Autumn Budget earlier today is how much DWP benefits will be uprated by in April. The rate of benefits increases every April in line with the rate of inflation from the previous September – and this amount is confirmed each year at the Budget.
The exact amount that state benefits are set to rise by next year was confirmed following the release of the latest inflation data by the Office for National Statistics. UK inflation remained unchanged at 3.8% in September – despite the majority of economists and the Bank of England having expected inflation to rise to 4%.
Ms Reeves was given the difficult task of trying to plug a £50 billion black hole in the nation’s public finances this year. Before the Budget, Ms Reeves said that her main aims were to cut the cost of living, cut NHS waiting times and cut public spending. However, she has faced significant backlash for hiking taxes and cutting ISA limits.
Rumours had long been circulating as to how the Chancellor planned to cut costs this year, with a proposed increase to income tax making headlines in the past few weeks. However, earlier this month, she dropped plans to hike the headline rate of income tax – something which would have broken a Labour manifesto pledge – after receiving economic forecasts which were not quite as grim as first feared.
Without any money coming from increased income tax, the Treasury has pursued a “smorgasbord” approach of raising a range of smaller taxes, with limits to salary sacrifice schemes and new measures to tax electric vehicles being introduced.
Among the most significant changes announced today are the removal of the two-child benefit cap, a minimum wage increase, a lock on income tax thresholds and the removal of certain pension perks.
How does inflation impact benefits?
The Government is required to review the level of benefits each year to see if they have kept up with increases in general prices. Inflation in the year to September has generally been the measure used.
That worked against recipients this April – when Universal Credit, Personal Independence Payment, Carer’s Allowance, Income Support, Housing Benefit or Jobseeker’s Allowance rose by only 1.7% – the rate of inflation in September 2024.
But by April this year, the same measure of living costs had jumped to 3.8%. The September inflation number is expected to be a peak, and is likely to be lower by next April, based on current assumptions.
Which benefits will increase?
There are nine benefits which the DWP is legally required to increase in line with inflation each April. Other benefits are subject to Parliamentary approval. The benefits that are legally required to rise with inflation are:
- 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
How much will Universal Credit rise by?
The Budget confirmed that the UC Standard Allowance, which is the basic amount of UC eligible households receive, will increase by over 6% in April 2026. This is being implemented in line with the UC Act 2025.
That means standard allowance will be increasing by the September rate of inflation and then a further 2.2%. In cash terms the standard allowance is set to rise by the following amounts each month:
- Single under 25: £316.98 → £336.00
- Single 25+: £400.14 → £424.15
- Couple under 25: £497.55 → £527.40
- Couple 25+: £628.10 → £665.79
However, this is offset for new claimants with a long-term health condition or a disability. There is an extra payment called the “limited capability for work-related activity” element and this amount is decreasing from next April for most people who aren’t already getting it.
