A spike in inflation is expected to trigger higher than otherwise benefit increases next April, including for Universal Credit – but leave the government with an £18billion bill
Millions of working age households are expected to get the biggest benefits increase in more than a decade.
September’s inflation figure is typically used to decide how much a host of benefits will rise by from next April. This figure was today confirmed to be 3.8% and this unchanged from the previous month.
However, many recipients – including most on Universal Credit as well as those who get the state pension – will get bigger increases than this.
How does inflation impact benefits?
The government is required to review the level of benefits each year to see if they have kept up with increases in general prices. Inflation in the year to September has generally been the measure used.
That worked against recipients this April, when Universal Credit, Personal Independence Payment, Carer’s Allowance, Income Support, Housing Benefit or Jobseeker’s Allowance rose by 1.7%
That was the rate of inflation in September 2024. But by April this year, the same measure of living costs had jumped to 3.5%.
The flipside is likely to happen this time around. The September inflation number is expected to be a peak, and is likely to be a fair bit lower by next April, based on current assumptions anyway.
How much will my benefits rise by?
We need to wait for the Department for Work and Pensions to confirm the details, and the size of the increase will also depend on the benefits you get.
But in previous years, the September rate of inflation has been used to determine the uprating for most benefits. This means many benefits look set to increase by 3.8% next April.
How much will Universal Credit rise by?
The government has announced changes to Universal Credit as part of its welfare reforms that will affect everyone from next April. The monthly payment is made up of a ‘standard allowance’ plus any additional payments you might get based on your circumstances.
The standard allowance will be increasing, with the Resolution Foundation estimating it will most likely be 6.4%, which would be worth £26 per month. The standard allowance of Universal Credit for under 25s is going up by 7%.
You might also be affected if you get the additional payment because you have a long-term health condition or a disability. This payment is called the ‘limited capability for work-related activity’ element and the amount is decreasing for most people who aren’t already getting it.
How much will the state pension rise by?
The state pension goes up each April by in line with the ‘triple lock pledge, the highest of the consumer prices measure of inflation, average earnings growth, or 2.5%.
Given September’s inflation, it is lower than average earnings growth figure for May to July 2025 of 4.8%, meaning that in April 2026 the full rate of the new state pension is likely to rise by £11 to £241 per week.
While not every pensioner receives exactly this amount, the majority of newly retired pensioners receive the full rate of the new state pension, or an amount very close to this.
What about other benefits?
Most benefits that are linked to inflation will be uprated by around 4% These include Personal Independence Payment (PIP), Disability Living Allowance (DLA), Employment and Support Allowance (new style) Jobseeker’s Allowance (new style), Carer’s Allowance, Child Benefit, Housing Benefit (applicable amounts) Attendance Allowance
What do charities and others have to say?
Anna Stevenson, a benefits expert at anti-poverty charity Turn2us, said increasing the Universal Credit standard allowance above inflation was “a step in the right direction, but it comes after decades of erosion. “ She added: “Many households will still struggle to meet basic costs because rents, childcare and energy have risen far faster.”
The Resolution Foundation points out that the real-terms value of the standard allowance has fallen by 10% since 2012/13 because of a jump in inflation.
How much will this cost the government?
The Office for Budget Responsibility said it March that it expected inflation to be running at 4.6% now, and average earnings to be 4.6%. Under those assumptions the increase in the total welfare bill next year was expected to be £16billion, of which £7.6billion came from the state pension and £8.4billion from other benefits.
Higher than expected inflation is likely to add around £500million to the pensions bill, and £1.3billion to other benefits, meaning a total increase of nearer £18billion, according to analysis by the Institute for Fiscal Studies.