A significant policy change to Universal Credit takes effect today, reducing the maximum percentage the government can deduct from benefits for debt repayment.
This reform, introduced as part of a broader effort to alleviate financial hardship, aims to leave households with more money available for everyday essentials.
According to the Manchester Evening News, the new cap is expected to provide tangible relief for many of the lowest-income families across the UK.
The adjustment will affect over one million households and is projected to increase their average disposable income, offering a more stable financial outlook and easing pressure caused by persistent repayment obligations.
Fair Repayment Rate Now Capped at 15%
Effective from April 30, the Department for Work and Pensions (DWP) has reduced the cap on deductions from Universal Credit standard allowances from 25% to 15%. This applies to all assessment periods beginning on or after this date.
This change was announced by the Chancellor of the Exchequer during the Autumn Budget as part of the government’s broader Plan for Change, designed to improve living standards and combat the cost-of-living crisis.
1.2 Million Households to Benefit, Including Families With Children
The DWP estimates that 1.2 million households will be affected by the new cap, with an average annual gain of £420. Among these, 700,000 are households with children, highlighting the measure’s targeted impact on families.
In total, 2.8 million households currently face deductions from their Universal Credit payments each month to repay debts. The revised policy aims to ensure those repayments remain sustainable while allowing claimants to meet essential daily expenses.
Government Highlights Support for Working Families
In a statement, Chancellor Rachel Reeves emphasized the practical impact of the reform:
As announced at the budget, from today, 1.2 million households will keep more of their Universal Credit and will be on average £420 better off a year.
This is our plan for change delivering, easing the cost of living and putting more money into the pockets of working people.
Work and Pensions Secretary Liz Kendall also highlighted the reform’s wider social purpose :
As part of our Plan for Change, we are taking decisive action to ensure working people keep more of the benefits they’re entitled to – which will boost financial security and improve living standards up and down the country.
We’re delivering meaningful change to ensure everyone has a fair chance, the support they need, and real hope for the future.
Part of Broader Anti-poverty Initiatives
The Fair Repayment Rate is one of several new initiatives included in the Plan for Change, which also encompasses 750 new free breakfast clubs for primary school children in England. These measures reflect the government’s attempt to address both short-term financial stress and long-term child poverty.
The repayment cap is designed to strike a balance: supporting debt recovery for public funds while helping low-income households maintain financial stability. The reform is expected to ease pressures faced by many working families and provide more consistent financial footing.
Perspective on Impact
By capping repayment deductions and allowing claimants to retain more of their benefit entitlement, the government aims to reduce economic insecurity without interrupting repayment obligations.
With millions of households affected by Universal Credit debt deductions, the policy change marks a shift in how welfare is administered in relation to debt recovery.
It remains to be seen how households will respond to the additional disposable income in the months ahead, but the policy is positioned as a key component of efforts to support vulnerable populations amid rising living costs.
