11.12.25

Benefits Update after the Autumn Budget 2025 – a quick guide

There is so much going on in the world of welfare benefits, that it’s difficult to know where to start with an update. So, in the spirit of optimism let’s begin with the ‘good news’ first. All benefit changes are scheduled for 6^th April 2026 onwards, so we have some time to prepare.

Removal of the so-called ‘two child limit’

This means that all qualifying children will be eligible for a child element in the overall Universal Credit (UC) award from 6^th April 2026. Up until then, the limit means that third and subsequent children are excluded from receiving a child element, unless they are either viewed as an exception, or were born before 3^rd April 2017. Removal of the limit will bring a total of 600,000 individuals (including 450,000 children) into entitlement. This change has long been urged by all of the poverty organisations and will deliver the single biggest change to the levels of child poverty.

However, as Child Poverty Action Group and many others have pointed out, unless the so-called ‘benefit cap’ limits are also increased, which seems unlikely, the removal of the two-child limit will simply mean that more families will see their overall UC entitlement reduce to keep their incomes in line with the benefit cap. This means that families who are not exempted from the cap will see no beneficial increase at all.

Increase in help towards childcare costs

Another welcome provision of the Budget is to increase the maximum amount which can be factored into the UC calculation for childcare costs. Up until 6^th April 2026, the ceiling for help towards childcare costs is set at a fixed amount for ‘two or more children’. After this date, the ceiling will be increased by £736.06 for each additional child above the current maximum cap for two children. This is extremely positive news for larger families needing help with childcare costs, especially as these costs are outside of the calculation for purposes of the benefit cap.

Increases in basic benefit rates

The amounts of UC standard allowances, and the rates of State Pension and Pension Credit, are all going up by more than the rate of inflation in April 2026.

However, if people are on UC which contains something called a ‘transitional element’, then the transitional element will be eroded by any increases in the standard allowance or other elements when benefit rates go up. That’s just how it is with the rules around transitional elements. Also, if the benefit cap limits are not increased, then increases in benefit rates simply bring more people into being capped.

And the not so good news.

Changes are on the horizon for people claiming UC on the basis of being too unwell to work. This is a complicated are which we will explain in more detail in future blog posts. The basic principle is that if a person is claiming UC on the basis that they have a serious illness or disability which means that they are too unwell to work, then the amount of the ‘health element’ payable within their UC will be both halved and frozen unless they come into one of these three categories:

• They were already receiving the higher ‘health element’ in their UC before 6^th April 2026; or
• They are viewed as being terminally ill; or
• They are viewed as having severe and lifelong conditions

Personal Independence Payments (PIP) are not affected at all by these forthcoming changes.

On the horizon but no details as yet

• There is a chance that the utterly confusing rules about how earnings affect the benefits of people living in supported accommodation will be improved later next year. Our team is waiting eagerly for more news on this.
• There are plans for the administration of pension age housing benefit and pension credit to be merged.
• There are plans for a significant increase in the number of face-to-face disability benefit assessments.

We’ll share updates on these when details are published.

That’s all for now, and we hope that this brief overview gives you a taste of what is around the corner.

How we can help

The welfare benefits landscape is changing frequently and our specialist benefits team will continue to keep families updated with our blog posts.

In the meantime, we can assist with benefit checks, claims, appeals and reviews, so please do get in touch if you would like assistance or guidance ahead of further changes.