New Fair Repayment Rate Comes into Effect
A significant change to Universal Credit has come into force today, 30 April 2025. The UK Government has implemented the new Fair Repayment Rate, reducing benefit deductions from 25 percent to 15 percent. This move will allow 1.2 million low-income households to retain more of their benefits. Among them, 700,000 households include children.
Figure 1: DWP to grant additional £420
Annual Financial Gain for Households in Debt
The change will result in an average increase of £420, annually for affected households. These are households that have been experiencing deductions from their Universal Credit payments due to outstanding debts. The new cap limits how much can be taken from the standard allowance in each assessment period. The updated rule applies to all assessment periods beginning on or after 30 April 2025.
Government Outlines Economic Strategy
The policy forms part of the UK Government’s Plan for Change. The broader agenda aims to improve living standards and help more people into jobs. Authorities intend to ensure working people retain more of the support they are eligible to receive. The plan also includes extending financial support for low-income families and overhauling employment services.
Chancellor Confirms Household Gains
Chancellor of the Exchequer Rachel Reeves confirmed the change during the official announcement.
“As announced at the budget, from today, 1.2 million households will keep more of their Universal Credit and will be on average £420 better off a year. This is our plan for change delivering, easing the cost of living and putting more money into the pockets of working people,” said Reeves.
Work and Pensions Secretary Reinforces Goals
Work and Pensions Secretary Liz Kendall echoed this commitment to financial security.
“As part of our Plan for Change, we are taking decisive action to ensure working people keep more of the benefits they’re entitled to – which will boost financial security and improve living standards up and down the country.
We’re delivering meaningful change to ensure everyone has a fair chance, the support they need, and real hope for the future,” Kendall said.
Debt Repayment Still Supported
An estimated 2.8 million households currently face deductions on their Universal Credit to repay debts. The Government stated the revised cap supports debt repayment in a more sustainable way. It ensures that those affected can meet daily living needs while still repaying what they owe. The Government confirmed the new 15 percent deduction rate will continue to support responsible debt recovery.
Plan for Change Targets Employment Growth
The Universal Credit reform is one measure in a broader employment and welfare reform. The Get Britain Working White Paper outlines a national push toward an 80 percent employment rate. The Government plans to overhaul Jobcentres, introduce a new jobs and careers service, and launch a youth guarantee. The youth guarantee promises that every young person will either be working or learning.
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Wage Reforms Support the Strategy
The employment-focused reforms align with recent increases in the National Minimum and National Living Wage. Authorities believe the wage hikes will make employment more attractive and financially viable. These combined actions are intended to reduce poverty by boosting income for working households.
Household Support Fund Extended
To continue supporting vulnerable families, the Government has extended the Household Support Fund. It allocated an additional £742 million to local councils. These funds allow councils to assist low-income households with essential costs. These include food, energy bills and other necessities. The funding also supports longer-term initiatives such as home insulation. These projects aim to reduce future living costs for households at risk of poverty.
Child Poverty Strategy in Progress
A dedicated ministerial taskforce is developing a new strategy to combat child poverty. One major measure already underway is the national rollout of free breakfast clubs in all primary schools in England. Authorities stated that these actions reflect the Government’s focus on giving every child a strong start in life.
Review of Universal Credit Underway
The Government confirmed this Universal Credit change is only the beginning. Officials are reviewing the broader Universal Credit system to ensure it remains effective. Authorities plan to assess how the system supports those in work, families with children and people facing financial hardship.
New Policy Marks First Step in Broader Reform
Today’s introduction of the Fair Repayment Rate signals the first move in a series of welfare policy reforms. The policy reflects the Government’s stated aim to increase household stability. It aligns with their Plan for Change, focused on raising income levels and creating employment opportunities. With over one million households now benefiting from the new repayment rate, the Government has set the tone for future reforms.
