Amid the ongoing cost-of-living crisis, families receiving Universal Credit and other benefits are set to see important updates in 2025. With changes to childcare support, disability benefits, and deductions from allowances, the Labour government’s reforms aim to offer greater financial relief to claimants. Here’s a detailed look at the changes and how they might impact families.
Annual Benefit Increases
Universal Credit payments saw a 6.7% rise in April 2024, but this year’s increase is set to be much lower at just 1.7%, aligning with last October’s inflation rate. While this smaller uplift may disappoint many families, additional measures are being introduced to offer targeted support:
- Childcare Costs: Starting in September, families receiving Universal Credit will gain more free childcare hours and greater financial support to cover childcare expenses.
- Disability Support: Families caring for disabled children will benefit from increases in benefits such as Disability Living Allowance (DLA) and Personal Independence Payment (PIP).
Changes to Deductions
A major improvement for Universal Credit claimants comes this April, as the cap on deductions drops by 10%. Previously, up to 25% of the standard allowance could be deducted for debts and repayments, but this cap will now reduce to 15%. This change provides struggling families with more financial breathing room.
Disability Benefit Updates
Families with disabled children will see modest but significant increases in their support payments:
| Disability Rate | 2024 Rate | 2025 Rate | Monthly Increase |
|---|---|---|---|
| Enhanced Care (Higher Rate) | £487.58 | £495.87 | £8.29 |
| Lower Disability Rate | £156.11 | £158.76 | £2.65 |
These increases aim to provide additional financial support for families facing higher care costs.
Overhaul of Work-Related Benefits
From spring 2025, the Labour government is revamping the benefits system to encourage more people into the workforce:
- Scrapping Limited Capability for Work: The current Limited Capability for Work and Work-Related Activity (LCWRA) components will be replaced with a new health element.
- Work Capability Assessment: Claimants will undergo a revised Work Capability Assessment, with new criteria for determining eligibility.
- Chance to Work Guarantee: Those previously categorized as having limited capability will receive tailored support to enter the workforce.
Increased Scrutiny
The Labour government continues to debate the controversial two-child limit on Universal Credit. Under current rules, families transitioning from legacy benefits to Universal Credit with more than two children maintain their additional payments, provided their circumstances remain unchanged. However, advocacy groups are pushing for a complete revision of this policy to better support larger families.
Additional Childcare Support
Starting this September, the government will roll out more free childcare hours for parents on Universal Credit. These changes aim to reduce financial strain and help parents access affordable childcare while staying in the workforce.
While the annual benefit uplift may be modest this year, targeted changes to deductions, disability support, and childcare assistance will offer some relief to struggling families. The Labour government’s overhaul of the benefits system seeks to balance financial support with measures to encourage employment. Families and individuals are encouraged to visit GOV.UK for the latest updates on eligibility and benefit adjustments.
FAQs
When will the new deduction cap take effect?
The deduction cap will drop from 25% to 15% in April 2025.
What are the new childcare support changes?
More free childcare hours and extra financial support begin in September.
How much will the enhanced care rate increase?
The rate will rise from £487.58 to £495.87 per month.
What is the Chance to Work Guarantee?
It offers tailored support for those with limited capability to join the workforce.
Will the two-child policy be removed?
The policy is under review, but no changes have been confirmed yet.
