Benefits and Pension Increases Begin with New Financial Year
A range of benefits and the state pension have increased as the new financial year commences, including additional support for larger families receiving universal credit.
The two-child benefit cap has been abolished, resulting in approximately 480,000 families with three or more children receiving an average annual increase of £4,100.
"It's a massive help," said one mother to the BBC, referring to the rise amid the rising cost of living, while charities have described the policy change as a "gamechanger." However, some critics argue that government funds could be allocated more effectively elsewhere.
For the past nine years, parents could only claim universal credit or tax credits for their first two children, a policy estimated to have saved the Treasury around £3.6 billion annually.
Case Study: Tracey Morris from Huddersfield
Tracey Morris, a single mother from Huddersfield with five children aged between six and 19, is among those benefiting. Her two youngest children, Luna and Harlie, were born after the cap was introduced.
Like 59% of families now receiving increased support, she is employed full-time by the local council and occasionally works extra shifts at a pub to supplement her income.
"I've always had to be careful what I spend and how I spend it. The cost of living got so high, it's a struggle," she explained.
Tracey relies on her local food pantry, The Bread and Butter Thing, to afford basic groceries.
"It's so draining. I'm exhausted worrying about money all the time. As a mum, sometimes you feel like you're failing, but I'm not failing, it's just the situation, unfortunately, that we are in," she added.
With many bills rising at the start of April, Tracey will now receive just under £300 extra each month for each of three children.
Universal Credit Adjustments
The child element of universal credit will automatically increase from May, so eligible parents do not need to apply for the additional funds.
Other changes to the basic allowance for universal credit, which is paid to all claimants, will result in about three million families receiving an average increase of £120 this year.
However, the health element of universal credit, provided to claimants whose disability limits their ability to work, will be halved. Existing claimants, numbering 2.8 million, will be protected, with the reduction applying only to new claimants.
Other Benefit Increases
Additional benefits, including all main disability benefits such as personal independence payment, attendance allowance, disability living allowance, and carer's allowance, have increased by 3.8%, aligning with rising prices.
State Pension Rise
The state pension is increasing by 4.8%, reflecting average wage growth due to the triple-lock system, which guarantees the highest of inflation, average earnings growth, or 2.5%.
Generally, 35 years of qualifying contributions are required to receive the full state pension.
However, the age at which individuals become eligible for the state pension is gradually increasing from 66 to 67 over the next two years.
Additional Fiscal Changes
Other changes effective at this time include modifications to inheritance tax on farms, dividend tax, tax relief on venture capital trusts, and homeworking tax relief.
Income tax thresholds have been frozen again this year, causing more individuals to begin paying tax or move into higher tax brackets as wages increase.
The Conservative government initially froze thresholds until 2028-29, and in November, Labour extended this freeze until 2031.
This policy raises additional revenue for public services but is often described by economists as a stealth tax because it increases tax revenue without raising rates.
The BBC has developed a calculator to help individuals understand how their pay may be affected.
The calculator applies to employees in England, Wales, and Northern Ireland. Tax bands in Scotland differ, and self-employed workers are subject to different tax rules.
