In a landmark move aimed at easing the financial burden for low-income families, the UK government has officially reduced the maximum debt deduction from Universal Credit payments, a change expected to boost household incomes by an average of £420 a year.
From April 30, 2025, the Department for Work and Pensions (DWP) has implemented a policy that caps deductions from Universal Credit at 15% of the standard allowance—down from the previous 25%. This decision comes as part of the government’s broader “Plan for Change”, a strategy aimed at addressing the cost of living crisis and enhancing support for working families.
“From today, 1.2 million households will keep more of their Universal Credit and will be on average £420 better off a year,” said Chancellor Rachel Reeves. “This is our plan for change delivering, easing the cost of living and putting more money into the pockets of working people.”
Who Will Benefit?
The DWP estimates that 1.2 million households will benefit from the policy change, including around 700,000 families with children. These families previously had significant portions of their Universal Credit payments deducted to repay advance loans, benefit overpayments, rent arrears, and utility debts.
Under the new rule, the 15% cap will apply to:
- Advance repayments
- Budgeting advances
- Benefit overpayments
- Rent arrears
- Utility arrears
However, deductions related to fraud penalties or sanctions may still exceed this cap.
Why Was This Change Necessary?
The previous 25% deduction limit was widely criticised for placing additional financial pressure on already struggling families. Charities and consumer advocacy groups warned that many claimants were left unable to afford basic necessities like food, heating, and rent after deductions.
By lowering the cap to 15%, the government aims to strike a balance between ensuring debts are repaid and maintaining a minimum standard of living for claimants.
A Citizens Advice analysis published in recent years showed that claimants with high deductions were five times more likely to need a food bank. The new rule seeks to alleviate this disproportionate hardship.
Additional Government Support Measures
In addition to this rule change, the UK government has announced several other initiatives to support low-income households and promote financial resilience:
1. Household Support Fund Extension
The fund has received an extra £742 million, which local councils will use to help residents pay for essentials like energy bills and groceries.
2. “Get Britain Working” Employment Plan
Aims to reach 80% employment through expanded job centre support, career services, and tailored employment coaching.
3. Free School Breakfast Clubs
Primary schools across England will begin offering free breakfast clubs to help combat child hunger and improve school performance.
What This Means for Claimants
For those receiving Universal Credit, the change could lead to a noticeable increase in monthly payments, depending on their individual circumstances and existing deductions.
For example, a single claimant who was previously subject to a 25% deduction may now retain an additional £35-£40 per month, offering much-needed relief amidst rising food and utility costs.
How to Check If You’re Affected
Universal Credit recipients are encouraged to:
- Review their payment breakdowns on their Universal Credit online account
- Contact Jobcentre Plus or Universal Credit helplines for clarification
- Seek help from local councils or debt advice organisations if they are still facing financial strain
Final Thoughts
This move marks a significant shift in how the government balances debt recovery with the welfare needs of vulnerable citizens. As inflation and living costs remain high, policies like this offer both immediate and long-term support for struggling families.
If you or someone you know receives Universal Credit, it’s worth checking how this new rule might positively impact monthly budgets.
This article has been carefully fact-checked by our editorial team to ensure accuracy and eliminate any misleading information. We are committed to maintaining the highest standards of integrity in our content.
Vikas Lalit is an experienced content writer at OTE News, covering business, economy, and international affairs. With a degree in Journalism, he combines analytical thinking with engaging storytelling to deliver well-researched updates. Vikas is passionate about uncovering underreported stories that impact readers.
Outside of work, he enjoys playing chess, following cricket, and writing short stories. His commitment to integrity and in-depth analysis strengthens OTE News’ mission of providing trustworthy journalism.
