The main benefits announcements in the Budget

4 mins read

Thursday 27 November 2025

Yesterday’s budget statement included a number of announcements involving changes in the rules for working age benefits.

Two-child limit scrapped

The biggest change is the scrapping of the two-child limit for Universal Credit claimants from April 2026.

If you claim Universal Credit, you get an additional amount – a “child element” – for each dependent child. However, families haven’t received the element for a third or subsequent child who was born after 6 April 2017. This is the two-child limit. From next April, families will start to receive the child element for their third and subsequent children.

This is a very welcome announcement, which should have a major impact on reducing child poverty within larger families. The government predicts that it could help raise as many as 450,000 children out of poverty.

However, there are concerns that families on Universal Credit with a transitional element may not see any gains in the short term. This is because the extra child payments they get may be deducted from the transitional protection they currently receive.

Universal Credit childcare help

If you get Universal Credit and you work and pay for registered childcare costs, you could receive an extra allowance – a “childcare element” – covering some of your childcare costs. 

The government is increasing the maximum amount of childcare costs that can be reimbursed when more than two children are in childcare. The current maximum amount payable for two or more children (£1768.94 per month) will increase by £736.06 per month for each additional child.   

Motability tax relief reform

From July 2026, vehicles leased through the Motability Scheme, or equivalent qualifying schemes, will be subject to VAT on any top-up “advance payment” for a more expensive vehicle. Insurance Premium Tax will also apply to vehicles leased through the scheme for the first time.

These changes are likely to make it more expensive for some to lease a Motability vehicle. However, they won’t apply to vehicles designed for, or substantially and permanently adapted for, wheelchair or stretcher users.

Some “premium” car brands are also being removed from the scheme. 

Benefits uprating and National Minimum Wage increase

Most working-age benefits will be uprated in line with the September CPI inflation of 3.8% from April 2026.

The standard element of Universal Credit will be increased by 6%.

The Chancellor also announced that the National Minimum Wage will increase to £12.71 per hour from April. This increase that should also lead to a rise in the Carer’s Allowance earnings limit at the same time. 

Health and disability assessments

The Chancellor announced a package of measures to start in April 2026.

These include increasing the DWP’s capacity to carry out Work Capability Assessment (WCA) re-assessments. More Personal Independence Payments (PIP) and work capability assessments will take place face-to-face, but there will be fewer people called for PIP reassessments where there has been no change in their function. 

Other changes

Some other changes the Chancellor announced include:

  • Amending the earnings rules for Housing Benefit and Universal Credit claimants in either supported or temporary accommodation from Autum 2026. Tenants in these types of tenancy will have more of their earnings disregarded for benefits purposes. 
  • Extra funding for the Youth Guarantee programme. The government has committed an extra £820 million over three years. This will fund additional employment and skills support for young people, as well as the guarantee of a six-month paid work placement for every eligible 18-21 year old who has been on Universal Credit and looking for work for 18 months. 
  • The government will extend DWP’s Targeted Case Review, a programme that aims to identify incorrect or fraudulent Universal Credit claims, to 2031.
  • The government will remove green levies from energy bills from 2026 in England, Scotland and Wales, lowering bills by £150 a year. (A different energy system applies in Northern Ireland).