Three key benefits will not be increased next year, which will come as a blow to millions of households.
The move comes despite plans to raise a majority of Department for Work and Pensions (DWP) benefits in line with September 2024’s inflation rate of 1.7%.
Universal Credit is one benefit due for the marginal increase in April 2025, with standard rates for single individuals aged over 25 set to rise from £393.45 to £400.14 a month.
However, the three components that influence the amount of Universal Credit a person receives will not rise with inflation.
These include the benefit cap, capital limits, surplus earnings, and local housing allowance.
The benefit cap
The benefit cap limits a household’s total benefits, including Universal Credit, child benefit, housing benefit, and jobseeker’s allowance. Housing benefits or Universal Credit may be reduced if incomes exceed the cap.
In Greater London, the cap is £25,323 for couples or single parents with a child of qualifying age and £16,967 for single adults without children. Outside London, the caps are £22,020 and £14,753, respectively.
However, the cap won’t affect people if they or their partner are claiming working tax credit (even with a nil award), are over Pension Credit age, or receive Universal Credit due to a disability, health condition, or as a carer.
Capital limits and surplus earnings
Capital limits determine the amount of savings a person can have before certain benefits, such as Universal Credit and Housing Benefit, are affected. Savings below £6,000 are disregarded when calculating benefits, while savings above £16,000 make an individual ineligible.
For savings between £6,000 and £16,000, benefits will be reduced according to specific tapering rules.
Surplus earnings limits are frozen until March 2026. If someone earns more than £2,500 above the threshold, that would stop their Universal Credit. In that case, the extra income is carried over to the following month and counts towards their total earnings, potentially reducing their payment.
Local housing allowance
Private renters on Universal Credit will see their housing support frozen next year, as Local Housing Allowance (LHA) rates will remain unchanged from April 2025.
The decision, confirmed after the Autumn Statement, will affect approximately 1.6 million households, leading to a potential shortfall of up to £3,129 a year in high-rent areas.
LHA rates determine the maximum amount of housing benefit or Universal Credit that private renters can receive based on their location and property size. The rates are meant to align with the cheapest rental costs in the area, but rising rents and frozen allowances mean tenants will be forced to shoulder more of their rent payments.
Earlier this year, LHA rates were adjusted to cover the lowest 30% of market rents, providing some tenants with as much as £4,200 in extra support. However, before this, rates had been frozen since 2020.
Keeping the freeze in place for 2025/26 will leave renters with an average gap of £14 per week, or £730 a year, according to the Resolution Foundation. In areas where rents are significantly higher, such as central London, shortfalls could reach £60 a week, equating to more than £3,000 annually.
