DWP Universal Credit rule change to give extra £420 to 1m households in Budget
Hundreds of thousands of Universal Credit claimants are to get a cash boost in next Wednesday's Budget. Labour Chancellor Rachel Reeves is expected to announce a new rule change to reduce the amount the Department for Work and Pensions can deduct from benefits to repay debts.
The new Fair Repayment Rate, put forward by Work and Pensions Secretary Liz Kendall, will take effect in April 2025 and cap deductions at 15 per cent rather than the current 25 per cent. The Guardian reported that the move will help 1.2 million families, including 700,000 with children.
Some of the poorest households will now be £420 better off as a result of the measure, which is expected to be announced next week. Save the Children estimates single parents could receive up to £39 more of their Universal Credit entitlement each month. For two-parent families, this could be up to £62. Two-thirds of children in Universal Credit households are pushed deeper into poverty by benefit deductions.
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Deductions are made from monthly Universal Credit payments for a number of reasons, including recovering arrears on rent, council tax, water and energy bills, along with repaying benefit advances and clawing back overpayments from those who were previously on tax credits. The full list of current repayment levels is included below.
StepChange Debt Charity said it was pleased to see today's reports that the Government will lower the amount that can be taken out of someone's benefits. The charity says unaffordable deductions have been a driver of hardship for those most at risk of problem debt and poverty.
Adam Butler, Public Policy Manager at StepChange Debt Charity, said: "Unaffordable deductions from benefits are a huge driver of hardship in the benefits system, pushing over nine in ten of those affected to go without essentials. StepChange has been campaigning with sector partners for years to see deductions drastically reduced and the Government’s announcement will make a massive difference to those affected.
"StepChange research shows more than one in four people (27 per cent) receiving Universal Credit are struggling with serious problem debt. Overhauling the deductions system will help people meet their essential costs like housing payments and reduce debt problems.
"We warmly welcome the Government signalling its intention to make real progress in tackling child poverty and taking concrete steps to increase household incomes among those most at risk of poverty and hardship."
What are the current Universal Credit deduction rules?
Third-party deductions for payment of arrears
5 per cent is taken off the standard allowance for debts or arrears owed to other people or organisations such as energy firms, local authorities and landlords (excludes deductions for rent and service charges that are already included in rent)
Single under 25: £15.58
Single 25 or over: £19.67
Joint claimants both under 25: £24.46
Joint claimants, one or both 25 or over: £30.88
Deductions for rent and service charges
Minimum deductions at 10% of Standard Allowance
Single under 25: £31.17
Single 25 or over: £39.35
Joint claimants both under 25: £48.92
Joint claimants, one or both 25 or over: £61.76
Maximum deductions at 20% of Standard Allowance
Single under 25: £62.34
Single 25 or over: £78.69
Joint claimants both under 25: £97.85
Joint claimants, one or both 25 or over: £123.52
Overall maximum deduction rate at 25% of Standard Allowance:
Single under 25: £77.92
Single 25 or over: £98.36
Joint claimants both under 25: £122.31
Joint claimants, one or both 25 or over: £154.40
Fraud Overpayments, Recoverable Hardship Payments and Administrative Penalties at 25% of Standard Allowance
Single under 25: £77.92
Single 25 or over: 98.36
Joint claimants both under 25: £122.31
Joint claimants, one or both 25 or over: £154.40
Ordinary Overpayments and Civil Penalties at 15% of Standard Allowance
Single under 25: £46.75
Single 25 or over: £59.02
Joint claimants both under 25: £73.38
Joint claimants, one or both 25 or over: £92.64
Ordinary Overpayments and Civil Penalties at 25% of Standard Allowance if claimant's and/or partner's earnings are over the Work Allowance
Single under 25: £77.92
Single 25 or over: £98.36
Joint claimants both under 25: £122.31
Joint claimants, one or both 25 or over: £154.40
Child Maintenance Deduction
£36.40
Daily reduction for sanctions
100% reduction rate
Single under 25: £10.20
Single 25 or over: £12.90
Joint claimants both under 25 (per sanctioned claimant): £8
Joint claimants, one or both 25 or over, and one is sanctioned (per sanctioned claimant): £10.10
40% reduction rate
Single under 25: £4
Single 25 or over: £5.10
Joint claimants both under 25 (per sanctioned claimant): £3.20
Joint claimants, one or both 25 or over (per sanctioned claimant): £4
Overpayments are generally only recovered if the amount owed is higher than £65 except in the case of fraud. Claimants who don't agree with DWP decisions to claw back excess payments can challenge this through a 'mandatory reconsideration' but any deductions will still carry on in the meantime.
If the DWP ends up going to court to get the right to recover overpaid benefits and wins the case, it can add the legal costs on to the amount owed.
The existing rules add that wrongly paid amounts of Maternity Payment, Funeral Payment, Winter Fuel Payment or Cold Weather Payment can be recovered by compulsory deductions if they are due to "misrepresentation or a failure to disclose" by the recipient but NOT if they are caused by an official error. However, it is still possible for the DWP to recover any additional amounts that have been wrongly paid to a person who was entitled to support but was given too much (such as £200 being given to a person instead of £100) or had a duplicate payment (such as two payments of £100 being issued rather than just one).
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