The Department for Work and Pensions (DWP) has announced that nearly four million households will receive an annual income boost worth an estimated £725, following the Royal Assent of the Universal Credit Act 2025 on 3 September. The new law, now an Act of Parliament, aims to rebalance the core payment and health top-up in Universal Credit.
The reforms will see the Universal Credit standard allowance permanently rise above inflation, amounting to £725 by 2029/30 in cash terms for a single person aged 25 or over. According to the Institute for Fiscal Studies (IFS), this represents the highest permanent real terms increase to the main rate of out-of-work support since 1980.
The DWP says the measures are designed to address the fundamental imbalance in the system which creates perverse incentives that drive people into dependency. Under the new 'Right to Try Guarantee', people receiving health and disability benefits can try work without fear of reassessment. This includes those recovering from illness who wish to return to work.
All current recipients of the Universal Credit health element and new customers with 12 months or less to live or who meet the Severe Conditions Criteria will see their standard allowance combined with their health element increase at least in line with inflation every year from 2026/27 to 2029/30. The DWP said: '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.'
In addition, a ministerial review of the Personal Independence Payment (PIP) assessment, led by Disability Minister Sir Stephen Timms, will be co-produced with disabled people and organisations. The DWP said: 'We will be engaging widely over the summer to design the process for the review.' The reforms are underpinned by a £3.8 billion investment in employment support for sick and disabled people over the Parliament.
