Millions Set for Income Shake-Up as 2026 Benefit Rates Confirmed
The Department for Work and Pensions (DWP) has unveiled the new rates for benefits and the state pension, setting out how the finances of millions of Britons will change from April 2026. Work and Pensions Secretary Pat McFadden delivered the details to parliament, confirming that most benefits will increase by 3.8 per cent, in line with September's inflation figure.
This annual review impacts around 24 million people who claim some form of support, representing over a third of the UK's population. The state pension, crucial for nearly 13 million pensioners, will see a larger boost of 4.8 per cent, adhering to the government's triple-lock guarantee by matching annual earnings growth.
Key Changes to Universal Credit and Disability Payments
The standard allowance for Universal Credit is set for a significant, above-inflation increase of approximately 6.2 per cent. This means a single person over 25 will see their monthly payment rise from £400.14 to £424.90.
However, a major change is coming for the health-related element of Universal Credit. The additional monthly payment for new claimants with limited capability for work and work-related activity (LCWRA) will be roughly halved, falling to £217.26. Existing claimants will see a minimal increase, with their rate effectively frozen until 2029.
For Personal Independence Payment (PIP), both components are rising. The enhanced daily living rate, for instance, will increase from £110.40 to £114.60 per month.
Pension Boost and the Looming Tax Threshold
Pensioners will see a welcome income rise. The new state pension will go up by £10.80 per week to £241.05, while the old state pension increases by £8.45 to £184.90 weekly.
This brings the annual value of the new state pension to £12,534.60, just over £34 shy of the current income tax personal allowance. With the tax threshold frozen until 2031, the state pension's value is projected to surpass it soon, raising concerns about pensioners facing an income tax bill. In response, Chancellor Rachel Reeves has pledged to Martin Lewis that no one whose sole income is the state pension will have to pay tax on it.
Other notable changes include an increase in Carer's Allowance to £86.45 per week and a rise in the weekly Pension Credit for a single person to £238.00.
Benefit Cap Frozen as Two-Child Limit is Axed
The overall benefit cap, which limits the total amount a household can receive, will be frozen for the fourth consecutive year. For a single adult without children outside London, the cap remains at £1,229.42 per month.
In contrast, the government is following through on its Budget announcement to scrap the controversial two-child benefit cap. This policy, which prevented parents from claiming support for a third or subsequent child, will end in April 2026.
These changes paint a mixed picture for claimants, with significant rises for some alongside targeted cuts and freezes for others, all set against a backdrop of ongoing welfare reform.
