Chancellor Rachel Reeves is set to unveil a significant £15 billion benefits spending package in this week's Budget, delivering a substantial boost to millions of claimants across the UK.
Key Benefit Increases from April 2026
The comprehensive package includes enhanced payments for working-age benefits such as Universal Credit, Personal Independence Payment (PIP), and child benefits, all scheduled to increase in line with September's inflation rate of 3.8% from April 2026. This move is estimated to cost approximately £6 billion.
For the over 3.8 million PIP claimants, this translates to a tangible weekly increase. Those receiving the highest awards for both daily living and mobility components will see their payments rise from £187.45 per week to £194.55.
Universal Credit Receives Additional Boost
Universal Credit recipients will benefit from an even larger increase due to legislative changes introduced by the Universal Credit Act 2025. With an additional 2.3% uplift on top of the 3.8% inflation rate, claimants will receive an above-inflation boost of 6.2% from April 2026.
This means single claimants' standard allowance will increase from £92 weekly to £98, while couples will see their payments rise from £145 weekly to £154. For individual claimants, this represents an additional £6 per week, totalling £312 annually.
Major Welfare Reforms and Political Context
In a significant policy shift, the Chancellor will completely abolish the two-child benefit cap, a measure estimated to cost £3 billion per year but projected to lift hundreds of thousands of children out of poverty.
The decision follows substantial backbench pressure that forced Ms Reeves to abandon earlier plans to revamp the welfare system, costing around £5 billion. She also reversed course on plans to remove winter fuel payments from millions of pensioners, adding £1.25 billion to government spending.
Meanwhile, the state pension will increase in line with earnings by 4.8%, exceeding inflation. This means the full state pension rate will rise by approximately £550, costing £7.8 billion.
The reforms also include controversial elements, such as halving the Limited Capability for Work Related Activity payments from £432 monthly to £217 before being frozen, while the standard rate receives an inflation-beating rise.
To fund these measures, the Chancellor is implementing a "smorgasbord" of tax hikes, including freezing income tax thresholds for another two years until 2030—a move expected to generate around £10 billion but that will push nine million workers into paying more tax.
Andy Haldane, former Bank of England chief economist, has warned that markets could lose faith if the government fails to control public spending, describing this as a "vulnerable moment" with risk of a "Wile E Coyote moment" in financial markets.
The Chancellor has indicated she remains committed to further welfare reform, though significant changes are unlikely until after reviews of disability benefits and support for young people not in employment are completed later next year.
