Update to Universal Credit Deductions

From 30 April 2025, changes to Universal Credit (UC) deductions will result in more than 1 million low-income households retaining more of their benefit payments. 

The Government’s new Fair Repayment Rate policy reduces the maximum deduction for repaying debts from 25% to 15% of the standard UC allowance. This adjustment is designed to ensure claimants have greater financial security while continuing to repay debts at a sustainable pace.

The change applies to all new assessment periods starting on or after 30 April 2025. Assessment periods are the month-long intervals used to calculate UC entitlement.

What Is the Fair Repayment Rate?

The Fair Repayment Rate is a statutory cap limiting how much of a claimant’s Universal Credit can be deducted to repay debts. These debts may include advance payments, overpayments, utility arrears, or other benefit-related debts.

Under the new regulations:

  • The cap has been lowered from 25% to 15% of the standard UC allowance.
  • The 15% maximum ensures that deductions are manageable and allow recipients to prioritise daily living expenses.
  • This change supports sustainable debt repayment without causing undue hardship.

This reform is part of the Government’s broader Plan for Change, aimed at tackling the cost-of-living crisis, reducing poverty, and boosting economic resilience.

Who Benefits from the Deduction Cap Reduction?

According to the Treasury:

  • 1.2 million households will gain from this policy shift.
  • On average, £420 more per year will remain in the pockets of affected households.
  • Approximately 700,000 of these households include children, highlighting the measure’s potential to alleviate child poverty.

This policy ensures that vulnerable families have access to a greater share of their monthly benefits to meet essential costs, including food, energy, and rent.

Why This Change Matters

With 2.8 million households facing UC deductions to repay debt each month, the previous 25% cap posed significant financial pressure. In many cases, deductions limited families’ ability to meet basic needs, compounding the cycle of poverty.

The new 15% limit acknowledges that:

  • People in debt still need access to funds for day-to-day expenses.
  • Reducing deduction pressure helps prevent escalation of financial hardship.
  • Debt repayments can and should be structured in ways that do not compromise essential living standards.

The change was first announced by Chancellor of the Exchequer Rachel Reeves during the Autumn Budget, as part of a coordinated strategy to improve living standards and strengthen economic security.

Chancellor Rachel Reeves said:

“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.”

Broader Measures Supporting Working Households

The Government’s Plan for Change also includes a number of policy reforms designed to boost employment and reduce poverty. These include:

1. Get Britain Working White Paper

  • Introduces a target to achieve an 80% employment rate across the UK.
  • Overhauls Jobcentres to provide more targeted, modernised services.
  • Launches a new jobs and careers service to offer tailored support.
  • Guarantees every young person a place in education or employment through the Youth Guarantee.

2. National Living and Minimum Wage Increases

  • Ongoing adjustments ensure that being in work continues to provide better financial outcomes than remaining on benefits alone.

Work and Pensions Secretary Liz Kendall said:

“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.”

Supporting the Most Vulnerable

To accompany the changes to UC deductions, the Government has extended other measures designed to support low-income households and those at risk of poverty:

1. Household Support Fund

  • Extended for another year with £742 million in funding.
  • Distributed through local councils.
  • Provides targeted assistance for:
    • Energy bills
    • Food expenses
    • Essential household items
  • Also supports long-term solutions, such as home insulation and energy efficiency improvements.

2. Child Poverty Strategy

  • Free breakfast clubs rolled out across all primary schools in England.
  • A new ministerial taskforce is working to deliver a strategic approach to ensuring every child starts life with equal opportunities.

These initiatives are designed to work in tandem with benefit reforms to reduce hardship and give households a pathway to stability.


Actionable Information for Claimants

From 30 April 2025, all assessment periods will apply the new 15% deductions cap. Claimants do not need to take action to receive this change—it will be applied automatically by the Department for Work and Pensions (DWP) if they are eligible.

If you are currently repaying debt through your Universal Credit and have questions about how this affects you:

  • Contact DWP via your Universal Credit online account.
  • Speak with a local advice service (such as Citizens Advice).
  • Request a breakdown of your current deduction rates.

Claimants should also regularly review their online Universal Credit journal for updates regarding their payment schedule and any changes in deduction amounts.

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