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Millions of benefits claimants will see a boost to their income from April 6 as new payment rates come into effect. It was confirmed by Chancellor Rachel Reeves in the autumn Budget last year that inflation-linked benefits will rise by 1.7% from the start of the new tax year on April 6, 2025.
The increase is in line with the Consumer Prices Index (CPI) rate of inflation in September 2024 and will give eligible UK households an extra dose of cash in their bank accounts. The uplift applies to working age benefits which includes Universal Credit, Personal Independence Payment (PIP), Attendance Allowance and Employment and Support Allowance (ESA), among others.
Pensioners are also in line for a payment boost from April 6 as the basic and new State Pensions will be uprated by 4.1%, in line with the annual increase in the Average Weekly Earnings index for May to July 2024. As the State Pension system is split into two schemes – basic and new – the amount that pension payments will increase depends on when you retired.
More than 12 million pensioners are set to benefit from the new rates, according to the Government, with those who get the full new State Pension getting up to £470 extra per year, while the full basic State Pension will be worth an extra £360 annually.
But while benefits and pension rates are increasing, the following benefits and allowances paid by the Department for Work and Pensions (DWP) and His Majesty’s Revenue and Customs (HMRC) will remain frozen at their current rates from April 6, so claimants won’t get any extra cash in the new tax year.
Benefit cap – DWP
The benefit cap is a limit on the total amount of benefits you can get before your payments are reduced, and it applies to most people aged 16 and over who haven’t reached State Pension age. It affects people claiming all of the following:
- Universal Credit
- Bereavement Allowance
- Child Benefit
- Child Tax Credit
- Employment and Support Allowance
- Housing Benefit
- Incapacity Benefit
- Income Support
- Jobseeker’s Allowance
- Maternity Allowance
- Severe Disablement Allowance
- Widowed Parent’s Allowance (or Widowed Mother’s Allowance or Widow’s Pension if you started getting it before 9 April 2001)
The DWP has frozen the benefit cap for the 2025/26 tax year, meaning the upper limit will remain unchanged. The rates will be as follows:
Annual level of benefit cap (Greater London)
- Couples with or without children) or single claimants with a child of qualifying age – £25,323.00 (Equivalent to £2,110.25 per month)
- Single adult households without children – £16,967.00 (Equivalent to £1,413.92 per month)
Annual level of benefit cap (rest of Great Britain)
- Couples with or without children) or single claimants with a child of qualifying age – £22,020.00 (Equivalent to £1,835.00 per month)
- Single adult households without children – £14,753.00 (Equivalent to £1,229.42 per month)
Capital limits – DWP
Capital limits is the threshold of savings and investments you can have while still being eligible for and receiving the full amount of benefits.
Currently, the upper capital limit is £16,000, so if your savings and investments exceed this then this would make you either ineligible to receive benefits, or you may receive a reduced amount. This upper limit will remain frozen at £16,000 in the 2025/26 tax year and will affect those who claim benefits including Universal Credit, income-based Jobseeker’s Allowance, income Support, income-related Employment and Support Allowance and Housing Benefit.
Over 80 additional pension – DWP
The over 80 pension is a State Pension for people aged 80 or over, and to get it you must get either an old basic State Pension of less than £101.55 a week, or no basic State Pension at all. From April 6, the payment rate for this pension will remain frozen at a miserly 25p.
The government explains: “Pensioners aged 80 and over receive an addition of 25 pence to their state pension. The age addition was introduced in 1971, in recognition of “the special claims of very elderly people who on the whole need help rather more than others”. It has never been uprated, with successive Governments either arguing that greater priority should be given to protecting the level of the basic benefits, or choosing to target additional resources at older pensioners by other means, for example, through means-tested benefits or lump sum payments, such as the Winter Fuel Payment.”
Personal Allowance – HMRC
The standard Personal Allowance threshold refers to the amount of income you can earn before having to pay tax on it and it is currently set at £12,570. From April, this rate will remain frozen at the same level.
Those who earn between £12,571 and £50,270 will pay a tax rate of 20%, those who earn between £50,271 and £125,140 will pay a 40% tax rate, and those who earn over £125,140 will pay a 45% tax rate.
If your income is more than £100,000 it decreases, so for every £2 you earn above this amount you lose £1 of your tax-free Personal Allowance.
Higher income tax band – HMRC
The higher income tax band rate will remain frozen at £50,270 for the 2025/26 tax year. It means that those who earn between £50,271 and £125,140 must pay 40% tax on the amount of income earned above the standard Personal Allowance threshold of £12,570. The additional rate, £125,000 with 45% tax, is also frozen again.
