A series of changes are due to impact Universal Credit from next year. Among these, the Department for Work and Pensions ( DWP ) has announced that almost four million households will see their annual income increase by an estimated £725.
This comes after a Bill designed to reform the welfare system received Royal Assent last month and is now referred to as the Universal Credit Act 2025. According to the Daily Record, the Universal Credit Act sets out reforms designed to rebalance the core payment and health top-up within Universal Credit.
The Act will see the Universal Credit standard allowance rise permanently above inflation, amounting to £725 by 2029/30 in cash terms for a single person aged 25 or over. The Institute for Fiscal Studies (IFS) states this marks the largest permanent real terms rise to the main rate of out-of-work support since 1980.
The DWP has set out measures in the Universal Credit Act designed to tackle the fundamental imbalance in the system which it claims "creates perverse incentives that drive people into dependency":
In addition to these changes, the DWP has introduced significant new measures, including the "Right to Try Guarantee". This allows those receiving health and disability benefits to attempt returning to work without fear of reassessment.
This includes individuals with a disability or health condition, such as those recovering from illness, who wish to return to work now their health has improved.
The Act also includes measures to protect the most vulnerable and severely disabled, including 200,000 in the Severe Conditions Criteria group. These individuals, who have the most severe, lifelong conditions and are unlikely to recover, will not be called for a Universal Credit reassessment.
All current beneficiaries of the Universal Credit health component, as well as new claimants with 12 months or less to live or who meet the Severe Conditions Criteria, will see their standard allowance combined with their Universal Credit health component rise at least in line with inflation annually from 2026/27 to 2029/30.
The DWP stated: "This means they can live with dignity and security, knowing the reforms to the welfare system mean it will always be there to support them."
Furthermore, the DWP is putting disabled individuals at the heart of a ministerial review of the Personal Independence Payment (PIP) assessment. This review is led by Disability Minister Sir Stephen Timms and co-produced with disabled people, alongside the organisations that represent them, experts, MPs and other stakeholders - ensuring it is fair and fit for the future.
The DWP said: "We will be engaging widely over the summer to design the process for the review and consider how it can best be co-produced to ensure that expertise from a range of different perspectives is drawn upon.
"These reforms are underpinned by a major investment in employment support for sick and disabled people - worth £3.8 billion over the Parliament. Funding will be brought forward for tailored employment, health and skills support to help disabled people and those with health conditions get into work as part of our Pathways to Work guarantee."
The DWP said: "This investment will accelerate the pace of new investments in employment support programmes, building on and learning from successes such as the Connect to Work programme, which are already rolling out to provide disabled people and people with health conditions with one-to-one support at the point when they feel ready to work."
Thomas Lawson, CEO of Turn2us, recently commented on the proposed reforms, stating: "MPs voted to reduce support for people unable to work by over £200 a month. Halving the health element of Universal Credit for anyone who becomes sick from April 2026 will increase hardship and mean even more people are going without essentials.
"To build a system we can all trust, the government now needs to review the whole system and really listen to disabled people and organisations like ours. In a country as wealthy as ours, sickness should never mean hunger or eviction."