DWP Confirms £725 Cost-of-Living Boost 2025 – Check Full Eligibility and Details

The Department for Work and Pensions (DWP) has announced a series of changes due to hit people on Universal Credit from April 2026. Nearly four million households will see an annual income boost estimated to be worth £725.**

Major Welfare Overhaul Confirmed for 2026

The changes come following the passage of the Universal Credit Act 2025, a landmark reform officially signed into law on September 3 after receiving Royal Assent. The Act introduces one of the most significant updates to the welfare system in decades, aiming to strengthen the financial support available to millions while restructuring how health-related elements are paid.

These reforms represent the largest permanent real-terms increase to out‑of‑work support since 1980, according to analysis from the Institute for Fiscal Studies (IFS). For millions of claimants across the UK, this could reshape how Universal Credit works, how support is accessed, and how health‑related conditions influence payment levels in the long run.

A New Era for Universal Credit Payments

The core highlight of the Act is the decision to increase the Universal Credit standard allowance above inflation for four consecutive years. By the end of the period, the increase will amount to £725 annually by 2029/30 for a single adult aged 25 or over.

This marks a shift in government strategy: strengthening the basic entitlement while adjusting health top‑ups to rebalance the support system.

Alongside this uplift, however, the Bill also introduces reductions and new eligibility limits on certain health-related elements—changes that have sparked debate among public support organisations.

Why the Government Is Reforming Universal Credit

According to DWP, the current welfare structure suffers from “fundamental imbalance”, with incentives influencing people’s dependency on certain health-related payments.

The government argues that the current system can unintentionally penalise individuals who want to attempt to work or return to work after illness.

The newly passed Act aims to:

• Encourage long-term employment
• Provide clarity on health eligibility
• Strengthen the value of standard Universal Credit
• Offer stability for those with severe or lifelong conditions

While the boost to the standard allowance has been broadly welcomed, other changes—particularly reductions to the health top‑up for new claimants—have been more controversial.

Key Measures Under the Universal Credit Reform Act

1. Standard Allowance to Increase Above Inflation

The Universal Credit standard allowance will rise above inflation for four consecutive years, starting in 2026.
By 2029/30, this will total an uplift worth £725 a year for a single claimant aged 25 or over.

This is designed to strengthen the base level of support for all claimants, regardless of health status.

2. Health Top-Up Reduced for New Claimants

From April 2026, the Universal Credit health top‑up for new claims will be reduced to £50 per week.

This change applies only to new claimants and not those already receiving the higher health element. The government states this adjustment is necessary to correct long-standing disproportion in the system.

3. Higher Health Payment Protected for Existing Recipients

Those currently receiving the Universal Credit health element will continue to receive the higher rate even after the new system comes into force.

Additionally, any new claimant who meets the Severe Conditions Criteria or whose case falls under the Special Rules for End of Life (SREL) will also remain eligible for the higher payment beyond April 2026.

This means that individuals with the most severe and lifelong conditions will not face payment reductions.

4. Exemptions from Reassessment for Severely Disabled Claimants

The new Act expands protections for individuals with severe disabilities.

More than 200,000 claimants who meet the Severe Conditions Criteria will be exempt from routine reassessments. This includes people with permanent, debilitating conditions unlikely to improve.

By reducing the need for repeated assessments, the government hopes to improve dignity, stability, and certainty for vulnerable individuals.

The New “Right to Try Guarantee”

One of the most significant reforms is the introduction of the Right to Try Guarantee.

This policy allows people receiving health or disability benefits—including those recovering from illnesses—to try returning to work without fear of reassessment or losing their benefits.

Under the new model, individuals can attempt employment for a short period while retaining their full support entitlement. This aims to:

• Encourage gradual re‑entry into work
• Reduce anxiety about losing long-term financial stability
• Support those whose health conditions fluctuate
• Offer flexibility for rehabilitation and recovery

DWP says this measure places “disabled people at the heart of a fair, modern welfare system.”

How Inflation Adjustments Protect the Most Vulnerable

Under the new Act, all recipients who receive both the standard allowance and the health element—specifically those under SREL or those who meet the Severe Conditions Criteria—will see both components rise at least in line with inflation every year from 2026/27 to 2029/30.

This ensures that people with the highest support needs maintain their real income value despite economic pressures.

Review of the Personal Independence Payment (PIP) Assessment

The government has also announced a major review of the PIP assessment system, led by Disability Minister Sir Stephen Timms, and co‑produced with:

• Disability advocacy groups
• MPs
• Healthcare professionals
• Welfare experts
• Organisations representing disabled individuals

The review aims to ensure the PIP system is “fair, future‑proof, and reflective of real‑life needs.”

Public engagement and consultation will take place throughout the summer to shape the new model.

Massive Investment to Support Disabled People into Work

Alongside legislative changes, the government is committing £3.8 billion over the duration of the Parliament to expand employment support for disabled people and those with health conditions.

This includes:

• Tailored job coaching
• Health support initiatives
• Skills programmes
• One‑to‑one work‑readiness guidance through the Pathways to Work scheme

The investment will scale successful programmes like Connect to Work, which already support thousands of people who feel ready to re-enter employment.

Public Reaction and Criticism

While some have welcomed the uplift to the standard Universal Credit allowance, criticism has been strong, particularly regarding the reduction of the health top-up for new claimants.

Thomas Lawson, CEO of Turn2us, condemned the cuts, stating:

“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.”

He further urged the government to review the entire welfare model in consultation with disabled people.

What These Changes Mean for Current and Future Universal Credit Claimants

Overall, the new welfare structure means:

• Existing health‑related claimants remain protected
• New Universal Credit applicants face different payment rules starting in 2026
• Standard allowance will rise significantly over four years
• Severe disability groups receive expanded protections
• People can return to work without risking reassessment

The reforms aim to modernise the system while offering stronger incentives for long-term employment—yet concerns remain about reduced support for those newly impacted by illness or disability.