As many Britons prepare their budgets for the coming financial year, knowing which benefits are set to change—and which are not—is essential. While several benefits tied to inflation, such as Universal Credit and the state pension, will increase in April 2025, others will remain unchanged. These frozen benefits may leave some individuals and families struggling to make ends meet.
Let’s look into three key payments and thresholds that will not increase this year, investigating why they remain frozen and how this impacts claimants.
Housing
The Local Housing Allowance (LHA) is a critical payment used to calculate housing benefits for private tenants in England, Scotland, and Wales. Unfortunately, this allowance will remain frozen at its current level until 2026.
Back in April 2024, the government adjusted LHA to match the lowest 30% of local rents based on figures from September 2023. Before that, it had been frozen for four years, using outdated 2019 figures. This freeze means housing benefit payments for private tenants will not increase, even as rental costs climb.
Campaigners warn this could push many families into poverty. For example, the Joseph Rowntree Foundation estimates over one million renters will be affected by the freeze, potentially forcing 20,000 private renters—including 10,000 children—into poverty by 2026. Labour MP Helen Hayes has criticized the freeze, urging the government to revisit LHA rates to prevent a surge in temporary accommodation demands.
Adding to this complexity, housing benefit is being phased out, with most recipients being moved to Universal Credit by the end of 2024. This transition raises further concerns about affordability for renters in the private sector.
Benefit
The benefit cap, introduced in 2013, limits the total amount of benefits a household can receive. While most benefits, like Universal Credit, are being uprated to match inflation, the benefit cap thresholds will remain frozen for another year.
Here’s a quick look at the current caps:
| Household Type | Outside London | Inside London |
|---|---|---|
| Couple or single parent | £423.46 p/w (£1,835 p/m) | £486.98 p/w (£2,110.25 p/m) |
| Single adult | £283.71 p/w (£1,229.42 p/m) | £326.29 p/w (£1,413.92 p/m) |
Certain claimants are exempt from the cap, including those receiving Universal Credit due to a disability, caring responsibilities, or working tax credit. While these exemptions provide some relief, the freeze could still disproportionately impact low-income families, especially in areas with high living costs.
Savings
The capital limit determines how much savings you can hold while remaining eligible for benefits. This rule has not changed for years, and the government has confirmed it will stay the same for the next financial year.
- Savings below £6,000: Full benefit eligibility
- Savings between £6,000 and £16,000: Reduced benefits (£4.35 deducted for every £250 over £6,000)
- Savings above £16,000: No benefit entitlement
While this threshold helps prioritize assistance for those in the greatest financial need, critics argue that it penalizes savers. With inflation and living costs rising, stagnant capital limits may create challenges for individuals who dip into their savings to manage day-to-day expenses, especially during times of financial strain.
These frozen benefits create uncertainty for many households. Without adjustments to align with inflation or rising costs, affected claimants may struggle to cover housing, living expenses, and unexpected emergencies. Campaigners and MPs continue to advocate for changes, but for now, individuals relying on these payments will need to plan carefully for the year ahead.
SOURCE – LINK
FAQs
What is the Local Housing Allowance?
LHA calculates housing benefit for private renters in the UK.
Will the benefit cap increase in 2025?
No, the benefit cap will remain frozen for another year.
How does the capital limit affect benefits?
Savings above £6,000 reduce benefits, and over £16,000 disqualifies eligibility.
Who is exempt from the benefit cap?
People with disabilities, carers, or working tax credit claimants are exempt.
What happens to housing benefit recipients?
Most will be moved to Universal Credit by the end of 2024.
