Universal Credit changes coming in to force today will see around 1.2 million of the poorest households – including 700,000 with children – will keep an extra £420 a year.

The new Fair Repayment Rate caps Universal Credit deductions at 15%, down from 25%.

It places a limit on how much people in debt can have taken off their benefits to pay what they owe.

What is the Fair Repayment Rate?

The Fair Repayment Rate was introduced by the Chancellor at the Autumn Budget, as part of broader efforts to raise living standards, combat poverty, and tackle the cost-of-living crisis.

Chancellor of the Exchequer Rachel Reeves said: "As announced at the budget, from today, 1.2 million households will keep more of their Universal Credit and will be on average £420 better off a year. This is our plan for change delivering, easing the cost of living and putting more money into the pockets of working people.

"With as many as 2.8 million households seeing deductions made to their Universal Credit award to pay off debt each month, the new rate is designed to ensure money is repaid where it is owed, and people can still cover their day-to-day needs."

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How does it work in a Universal Credit assessment period?

The maximum amount that can be taken from someone’s Universal Credit standard allowance payment to repay debt has been 25% – but from today this is reduced to 15%.

This will mean an average £420 extra a year for 1.2 million of the poorest households, including 700,000 households with children, while helping people to pay down their debts in a sustainable way.

The change will be applied to all assessment periods that start on or after 30 April.