Chancellor announces cost of living payments for benefit claimants

The Chancellor announced a new £15 billion package of targeted government support on 26 May 2022 to help with the rising cost of living¹. The package includes a one-off £650 cost of living payment to more than eight million low-income households on Universal Credit, Tax Credits, Pension Credit and legacy benefits¹. Separate one-off payments of £300 to pensioner households and £150 to individuals receiving disability benefits were also announced¹.

The £650 payment is being made in two instalments. To receive the first instalment, a claimant had to be claiming benefits, or have started a new claim, by 25 May 2022². Anyone who qualifies for Universal Credit now, after that date, will receive £324 rather than the full £650, with the second payment expected in the Autumn². Pension-age claimants who were entitled to Pension Credit on 25 May 2022 and start a claim before 18 August 2022 should receive the full £650, because Pension Credit claims can be backdated by three months; those who become eligible later, or claim after 18 August 2022 but before a second qualifying date that has not yet been announced, will receive £324².

The energy bills discount due to come in from October is being doubled from £200 to £400, and the requirement to pay it back is being scrapped, so households will receive a £400 discount on their energy bills from October¹. A new temporary Energy Profits Levy of 25% on oil and gas firms is expected to raise around £5 billion over the next year, alongside a new investment allowance of 80% to encourage firms to invest in oil and gas extraction in the UK¹. The £15 billion package brings total cost of living support to £37 billion this year, including the £150 council tax rebate that many families received in April¹. Almost all of the eight million most vulnerable households will receive at least £1,200 of extra support this year, according to the Finance & Leasing Association¹.

Existing claimants do not need to make a claim for the support payments or change benefits, as the payments are made automatically². The payments go to all existing claimants, including people on legacy benefits and tax credits, and claimants do not need to switch to Universal Credit to receive them².

Why it matters for households

The £650 payment goes to households on means-tested benefits, and the amount received depends on when a claim was made. Claimants who were already on a qualifying benefit on 25 May 2022 receive the full £650 in two instalments; those who claim later receive £324². Pension-age households receive an additional £300, and people receiving disability benefits an additional £150¹. The £400 energy bills discount applies from October and no longer has to be repaid¹. The payments are tax-free, according to entitledto.co.uk². The second qualifying date for the £650 payment had not been announced at the time of the 26 May 2022 statement².

What happens next

The first instalment of the £650 payment was due to claimants who were on a qualifying benefit on 25 May 2022². The second instalment, of £324, is expected in the Autumn, with a qualifying date that had not yet been announced². Pension-age claimants have until 18 August 2022 to start a Pension Credit claim and still receive the full £650, because of the three-month backdating rule². The £400 energy bills discount takes effect from October¹.