Universal Credit Claimants Set to Receive Extra £420 as Repayment Cap Changes

In a landmark decision, the Department for Work and Pensions (DWP) has confirmed a significant shift in how Universal Credit repayments will be handled, which is set to benefit over 1.2 million households. From April 2024, the maximum repayment cap will be reduced from 25% to 15%, allowing claimants to keep more of their benefit award. This change, part of a broader government initiative to provide more financial support to vulnerable individuals and families, means that claimants will retain an additional £420 annually, a crucial amount for those facing ongoing financial difficulties.

The DWP’s announcement comes at a time when millions of households are struggling with the rising cost of living, inflation, and other financial pressures. By lowering the repayment cap, the government aims to give claimants greater flexibility in managing their finances and focusing on their most pressing needs, such as paying for essential utilities, food, and other household expenses.

A More Fair Repayment System

The move to reduce the repayment cap is part of the DWP's effort to introduce a more balanced and fair repayment system, which prioritizes the most urgent financial obligations for Universal Credit claimants. In response to a written question in Parliament, work and pensions minister, Alison McGovern, explained, "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." This statement underlines the government's aim to provide a system that not only helps people manage their day-to-day expenses but also ensures they can meet their other financial responsibilities without the added strain of excessive deductions.

The DWP has long faced criticism for the level of deductions taken from Universal Credit awards, which were sometimes as high as 25% for claimants who had existing debts. By reducing this cap, the government is taking steps toward a more compassionate and equitable approach, which better aligns with the needs of those on low incomes. The reduction means that the average claimant will retain an additional £420 per year, a significant sum for many struggling to make ends meet. McGovern noted that this move will benefit around 1.2 million households, offering them a much-needed financial cushion.

The Importance of Carer’s Support

As part of the changes to Universal Credit, there will also be additional financial support for those who provide care for loved ones. For years, carers have had to balance their caregiving responsibilities with financial pressures, but the DWP’s latest adjustments are set to ease some of that burden. Work and pensions minister, Sir Stephen Timms, explained, "These benefits can be paid to carers at a higher rate than those without caring responsibilities through the carer element and the additional amount for carers respectively."

This is crucial, as many carers are often forced to sacrifice their own earnings or work part-time to fulfill their caregiving roles. The introduction of higher support for those who care for others will help ensure that they are not left financially vulnerable, given the heavy demands placed on them. By providing additional financial assistance through the carer element of Universal Credit, the government recognizes the unique challenges that carers face and the value of their work. In many cases, carers may find themselves unable to work full-time or even part-time, meaning that Universal Credit is their primary source of income. With the new changes, they will receive the financial support they need to cover essential living costs while continuing to care for loved ones.

Benefit Increase and Other Support Measures

Alongside the reduction in the repayment cap, Universal Credit claimants will see a 1.7% increase in their benefit payments starting in April 2024. This increase is part of the government’s broader initiative to adjust benefit payments in response to inflation and the rising cost of living. The new standard monthly allowance rates will be as follows:

• Single under 25: £316.98
• Single 25 and over: £400.14
• Couple joint claimants both under 25: £497.55
• Couple joint claimants both 25 and over: £628.10

These increases are designed to help claimants keep pace with inflation and rising costs of essential goods and services. The increase will provide an important financial cushion for many households across the UK, particularly those facing high inflation rates and increasing prices for necessities such as food, housing, and energy.

In addition to the standard benefit increase, those claiming Carer’s Allowance or other additional benefits will be able to access further financial support. Claimants who provide care for someone with a health or disability-related benefit could receive up to £2,400 more per year through their Universal Credit or Pension Credit claims. This additional support is particularly significant for those who have caregiving responsibilities, often at the expense of their own income and working hours.