Changes to Universal Credit deductions

At last year’s UK Budget, the Chancellor announced a reduction in the level of debt repayments that can be made from Universal Credit (UC) entitlement, which may include rent arrears. 

It has been confirmed that from April 2025 a new Fair Repayment Rate will be introduced, reducing the UC deductions overall cap from 25% to 15%. This change will be applied to new and existing deductions. 

There are certain exceptions where the cap may be exceeded though, and this includes rent and/or services charge arrears as well as fuel (gas and/or electricity) arrears. The thinking behind this move is to support people to continue to repay debts, although at a slower rate, and to enable them to address last resort debts such as rent and energy. This is to prevent consequences such as eviction and pre-payment meters being fitted. 

A recent Judicial Review has also ruled that the current landlord portal arrears deductions process is unlawful, because it does not require landlord verification or tenants’ opportunities to challenge it before implementation. The ruling includes a stipulation that claimants must have the opportunity to make representation if they believe a rent arrears repayment arrangement is not in their interest. This does not mean that the Alternate Payment Arrangement (APA) or Third Party Deduction (TPD)  will not be applied, but that the claimant's objection and the reasons for the objection must be considered as part of the best interest test. The DWP are currently telling claimants where a new APA or TPD has been requested they should contact them if they would like to object. This will only apply to new applications. 

The DWP will produce a revised policy and process – reportedly by the end of 2025 – that allows tenants to object to a redirection. There is some further technical information about which options would be available for a review versus an appeal – if either of which is successful the DWP would refund the tenant and pursue the landlord for an ‘overpayment’. There’s now an interim option while the policy/process revision is being incorporated where DWP will keep implementing deductions but write to social housing tenants to inform them they can object within 7 days. 

If members would like to provide any feedback on these changes, please contact Annabel at apidgeon@sfha.co.uk.  

Any technical questions can be sent to the UC Stakeholder Engagement Team at UNIVERSALCREDIT.ENGAGEMENTTEAM@DWP.GOV.UK