The Department for Work and Pensions (DWP) has announced that nearly four million households will receive an annual income boost estimated to be worth £725, following the Royal Assent of a Bill to overhaul the welfare system last month. The Universal Credit Act 2025 is now an Act of Parliament.
The Universal Credit Bill, which aims to rebalance the core payment and health top-up in Universal Credit, 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 stated that the Universal Credit Bill includes measures to address the ‘fundamental imbalance in the system which creates perverse incentives that drive people into dependency’ through:
- Increasing the Universal Credit standard allowance above inflation for the next four years – worth an estimated £725 by 2029/30 for a single adult aged 25 or over.
- Reducing the health top-up for new claims to £50 per week from April 2026.
- Ensuring that all existing recipients of the Universal Credit health element – and any new claimant meeting the Severe Conditions Criteria and/or that has their claims considered under the Special Rules for End of Life (SREL) – will receive the higher Universal Credit health payment after April 2026.
- Exemptions from reassessment for those with the most severe, lifelong conditions.
In addition to these changes, the DWP has introduced significant new measures, giving those receiving health and disability benefits the right to try work without fear of reassessment, reports the Daily Record.
This new ‘Right to Try Guarantee’ applies to people with a disability or health condition – such as those recovering from illness – who wish to return to work now their health has improved.
The Bill also outlines measures to safeguard the most vulnerable and severely disabled, including 200,000 people in the Severe Conditions Criteria group – those with the most serious, lifelong conditions who are unlikely to recover – who will not be required to attend a Universal Credit reassessment.
All current recipients of the Universal Credit health element and new claimants with 12 months or less to live or who satisfy the Severe Conditions Criteria will also witness their standard allowance combined with their Universal Credit health element increase at least in line with inflation annually 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.”
The DWP is also placing disabled people at the centre of a ministerial review of the Personal Independence Payment (PIP) assessment headed by Disability Minister Sir Stephen Timms and co-produced with disabled people, alongside the organisations that represent them, experts, MPs and other stakeholders – ensuring it is fair and fit for the future.
The DWP said: “We will be engaging widely over the summer to design the process for the review and consider how it can best be co-produced to ensure that expertise from a range of different perspectives is drawn upon.
“These reforms are underpinned by a major investment in employment support for sick and disabled people – worth £3.8 billion over the Parliament. Funding will be brought forward for tailored employment, health and skills support to help disabled people and those with health conditions get into work as part of our Pathways to Work guarantee.”
The DWP continued: “This investment will accelerate the pace of new investments in employment support programmes, building on and learning from successes such as the Connect to Work programme, which are already rolling out to provide disabled people and people with health conditions with one-to-one support at the point when they feel ready to work.”
Recently commenting on the proposed reforms, Thomas Lawson, CEO of Turn2us, said: “MPs voted to reduce support for people unable to work by over £200 a month. Halving the health element of Universal Credit for anyone who becomes sick from April 2026 will increase hardship and mean even more people are going without essentials.
“To build a system we can all trust, the government now needs to review the whole system and really listen to disabled people and organisations like ours. In a country as wealthy as ours, sickness should never mean hunger or eviction.”