April’s universal credit changes mean giveaways now, takeaways later

Three reforms to universal credit (UC), the UK’s main working-age means-tested benefit received by 6.6 million families, take effect on 6 April 2026. Together, they will change the incomes of almost all who receive the benefit. This comment summarises these reforms and their impact.

What changes are happening in April?

A family’s UC entitlement is made up of several components. As well as elements for rent and childcare costs, claimants receive:

• A standard allowance, paid to all claimants, which varies by whether the claimant is a single person or in a couple and by their age. For those aged over 25, the standard allowance is £4,802 per year for a single person and £7,537 for a couple.
• A child element, worth £3,514 per child per year.1
• A health element of £5,079 per year, paid to claimants who are assessed as being unable to work.

All three of these elements are changing from 6 April. First, the real value of the UC standard allowance will be increased by 2.3% more than inflation. This is the first of four real-terms rises that are planned between now and 2029–30, which will cumulatively represent a 4.8% rise in the real value of the standard allowance and will cost £1.6 billion per year in today’s prices.

Second, the government is removing the ‘two-child limit’. This policy meant that families with third or subsequent children born after 5 April 2017 were not eligible to receive an additional child element of UC. Scrapping the two-child limit means that claimants with three or more children will receive the child element for all their children, eventually costing around £3 billion per year.

Finally, the UC health element will be halved for most new claimants, from £5,079 to £2,556 (in 2025–26 terms). This new value is also frozen in cash terms until 2029–30, meaning that by then it will be worth only £2,409 in current prices. Existing claimants, and new claimants assessed as having particularly severe conditions (the ‘severe disability group’), will continue to receive a higher (unfrozen) rate, chosen so that the combination of their UC health element and the standard allowance will not change in real terms, meaning that they will not benefit from the increase in the standard allowance. The government estimates that 10% of new claimants will be placed in the severe disability group in 2029–30. When fully rolled out, this reform will save the government £7 billion per year.

What do these changes do to families’ incomes?

Though these changes will begin to be rolled out from 6 April, they will not all come into full force immediately. The 2.3% standard allowance rise will come into effect overnight, benefiting almost all families receiving UC and delivering a £120 per year gain to the average family, but there will be further increases in future years which will increase this to £247 per year. Likewise, the two-child limit will be abolished for all families on Monday. This represents an immediate average gain of £4,100 per year in today’s prices for around 480,000 families (who will also gain from the standard allowance rise), though since the two-child limit had not yet been fully rolled out,2 more families will benefit from its abolition in the long run. The cut to the health element, meanwhile, will come into force only very slowly. Existing claimants are protected for as long as their claim lasts, and people typically stay on these sorts of health-related benefits for many years, meaning the cut will likely not be fully implemented for decades – around 15% of current claimants of the UC health element (or equivalent benefits) have been in receipt for at least 15 years. This follows a broader pattern of very long-lasting transitional arrangements for those who lose out from benefit cuts (Latimer and Oulton, 2025).

Figure 1 shows the number of families who will gain or lose from these reforms when fully rolled out, using current caseloads.3 The figure demonstrates that a large number of families (3.3 million) will benefit by a relatively small amount (£247 per year) due to the uplift in the UC standard allowance. A much smaller number – 650,000 UC-receiving families with three or more children – will benefit much more from the abolition of the two-child limit. Most of these will gain by £3,850 per year, or the value of the child element of UC for an additional child plus the uplift to the standard allowance, but families with many children will benefit much more, with the small number of families with at least five children gaining over £10,000 per year. Finally, claimants on the new, lower health element rate will be worse off by around £2,400 per year. Once the policy is fully rolled out – which, as discussed above, will take decades to occur – this will, on current caseloads, affect 2.4 million families. (A relatively small number of families have three or more children and receive the health element, which we indicate with striped bars; they will gain, but by less than others with at least three children.)

Figure 1. Long-run change in household income due to universal credit reforms

_{Note: The chart shows the effect of the three UC reforms we discuss, once all reforms have been fully rolled out. Existing claimants of income-based employment and support allowance are modelled as being transitioned to UC. The standard allowance uplift shown is the gain above CPI inflation from the 4.8% real-terms rise that has been legislated for by 2029–30. The UC health element cut incorporates the nominal freeze for the new lower rate planned until 2029–30. We do not model families who are not currently eligible for UC (because their other income places them above the end of the UC means-testing taper) but would gain eligibility due to the reforms. We also do not incorporate the impact of the benefit cap for families who are not currently affected by it but who would be under the reforms. The different bars among families with 3+ children are those with three, four, and five or more children. Those with five or more children are modelled as a five-child family. Striped bars indicate households who receive the health element and contain three or more children. Families whose income is not affected are excluded.}

_{Source: DWP Stat-Xplore (November 2025), DWP benefit rates, 2026 to 2027.}

Conclusion

The reforms coming in on Monday will, eventually, affect almost everyone who receives universal credit.4 Their combined impact is to shift support away from those with health conditions and towards those who claim for any other reason – especially those with several children. But while the giveaways kick in quickly, with substantial overnight increases in income, the effects of the cuts will take decades to be fully felt.