Changes are set to affect Universal Credit from next year. Among these, the Department for Work and Pensions (DWP) has revealed that nearly four million households will see their annual income rise by an estimated £725.
This follows a Bill aimed at reforming the welfare system receiving Royal Assent last month, now known as the Universal Credit Act 2025. As reported by the Daily Record, the Universal Credit Act outlines reforms intended to rebalance the core payment and health top-up within Universal Credit.
The Act will result in the Universal Credit standard allowance permanently rising above inflation, equating to £725 by 2029/30 in cash terms for a single person aged 25 or over. The Institute for Fiscal Studies (IFS) suggests this represents the largest permanent real terms increase to the main rate of out-of-work support since 1980.
The DWP has outlined measures in the Universal Credit Act aimed at addressing the fundamental imbalance in the system which it argues "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 individuals receiving health and disability benefits, such as those recovering from illness, to attempt returning to work without fear of reassessment, particularly if 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 recipients of the Universal Credit health component, along with new applicants who have 12 months or less to live or satisfy the Severe Conditions Criteria, will see their standard allowance combined with their Universal Credit health component increase at least in line with inflation each year 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."
Additionally, the DWP is placing disabled people at the centre of a ministerial review of the Personal Independence Payment (PIP) assessment. This review is headed 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 commented: "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 shared his thoughts 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."