Fair Repayment Rate introduced

The UK Government introduced the Fair Repayment Rate in April 2025, reducing the cap on debt deductions from a Universal Credit (UC) standard allowance from 25% to 15%¹. The measure was announced in the Autumn Budget 2024, published on 30 October 2024, and the regulations were amended from April 2025¹.

Under the change, the total amount of debt deductions that can be taken from a UC payment is capped at 15% of the standard allowance, down from 25% previously². Deductions covered include amounts taken to repay debts to the Department for Work and Pensions or other creditors, such as advance payment loans used to bridge the five week wait for a first UC payment². The limit does not apply to other types of deduction, including the benefit cap². Deductions can still be taken beyond the 15% limit in some cases, such as last resort deductions for rent arrears where someone is at risk of being made homeless².

The Department for Work and Pensions said the change would bring a £420 boost to over a million households². Citizens Advice estimated it would benefit 1.2 million households, boosting incomes by £420 a year on average³. The Joseph Rowntree Foundation described the introduction of the Fair Repayment Rate from April 2025 as "a very welcome step"². The Scottish Government's child poverty report states that UK Government reform, including the Fair Repayment Rate, "has reduced the level of public debt deductions and delivered financial gains, particularly for families with children"⁴.

The Budget also confirmed that the regulations would allow payments to be backdated to February 2024¹. The same Budget set out that DWP and HMRC working-age benefits would rise by 1.7% in April 2025, in line with September's inflation, while pension-age benefits would increase by 4.1% under the Triple Lock¹. Local Housing Allowance rates were frozen rather than increased in April 2025, as was the level of the benefits cap¹.

Why it matters for households

Around half of households receiving UC have at least one deduction taken from their payment². In February 2025, 47% of all UC households were subject to deductions³. For households with debt deductions, the Fair Repayment Rate means a larger share of the standard allowance is paid out rather than withheld, from April 2025¹.

The change applies to debt deductions only. Households also affected by the benefit cap continue to see that amount deducted on top, and the 15% limit does not cover it². The Joseph Rowntree Foundation notes that 62% of households with a benefit cap deduction in February 2026 also had a debt deduction, with around three quarters of those seeing a debt deduction of over 10% of their UC standard allowance². It gives the example of a single person aged 25 or over, receiving a headline UC standard allowance of £98 a week, who faces a 15% debt deduction of £15 a week and an average benefit cap reduction of £80 a week, leaving £3 a week after rent².

The rate sits alongside other changes to Universal Credit and to how deductions from Universal Credit are calculated. Repayments of a Universal Credit advance are among the debts counted within the cap².

What happens next

The two-child limit on UC is to be removed from April 2026². The Joseph Rowntree Foundation states that the DWP estimated around 50,000 families would not gain at all from scrapping the two-child limit because they are subject to the benefit cap, and around 10,000 families would only partially gain because they start to be benefit capped². It has proposed a protected minimum floor below the standard allowance, which it estimates would lift 130,000 people out of very deep poverty in 2027/28, including 100,000 children, at an annual cost of between £600 million and £700 million². No government decision on that proposal has been reported.