While most benefits and pensions paid by the DWP and HMRC rise each year to keep up with inflation, the government has confirmed that several payments will not increase in 2026.
The Department for Work and Pensions (DWP) and HMRC have several key benefits that will remain frozen throughout 2026.
This amounts to a real-terms cut, affecting purchasing power over time. Low-income households, pensioners on fixed incomes, and families on these benefits are likely to feel the impact.
Housing Benefit and Local Housing Allowance
Housing benefit rates used to be linked to the cost of rents in different areas, and went up annually, but this ended under the Tory-Lib Dem coalition in 2012.
As rents rise, a freeze means tenants are left struggling to meet their rent payments. After years of freezes by successive governments, housing charities have said that many claimants will be unable to cover rising rent costs, with the Joseph Rowntree Foundation suggesting that private renters on housing benefits were around £700 worse off last year, or £887 per year for a working-age couple with children.
Universal Credit Health Element
The Universal Credit Act 2025 has ushered in controversial changes which aim to ‘rebalance’ Universal Credit rates from April 2026 by increasing the basic standard allowance that all claimants receive, while cutting the additional payments for most claimants newly found to have disabilities and health conditions that affect their capability for work.
This means:
- Increasing the Universal Credit standard allowance above inflation over the four financial years from 2026/27. By 2029/30, the UC standard allowance will be 4.8% higher than it would have been under the normal practice of increasing the standard allowance in line with Consumer Prices Index (CPI) inflation over the period.
- Reducing the additional amount awarded to help people who are sick or disabled - known as the LCWRA element - by approximately half for most claimants newly entitled to it, from £432.27 a month to £217.26 a month, which will then be frozen in each year to 2029/30.
- Creating a ‘protected’ cohort of existing LCWRA element recipients and new claimants who are terminally ill or have severe, lifelong conditions and are never expected to work. This 'protected' group will see the combined rate of their UC standard allowance and health element increase at least in line with inflation in each year from 2026/27 to 2029/30.
New applicants for the universal credit health element will see their payments cut by half and frozen in 2026. This payment is intended for those with long-term severe health conditions, those with a terminal illness, or those recovering from cancer treatment.
Limited capability for work element
The limited capability for work (LCW) element is the lower, work‐preparation component of universal credit. For those who still receive it, the rate is being frozen.
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£10 Christmas Bonus
The Department of Work and Pensions (DWP) Christmas bonus will remain at £10, despite a petition entitled Adjust the £10 DWP Christmas Bonus introduced in 1972 to reflect inflation.
Petition founder David Kirkwood says: "In the early 1970s, £10 was a valuable uplift for those without income, to help with the increased costs associated with Christmas time. It would have helped towards paying for heating and electricity, food and drinks or Christmas presents for kids.
"It would have been the equivalent of approximately £180 today adjusted for inflation. £10 today won't even buy a round of drinks, wouldn't pay for a quality Christmas pudding or buy a box of decent Christmas Crackers. £10 quite frankly is insulting."
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