Thousands of UK families to face financial strain as key benefits remain unchanged in April

Next year, three major benefits will not see an increase, impacting the finances of thousands of Britain's lowest income households, including many families with children. The budget revealed that most benefits, including Universal Credit, will rise by a mere 1.7 percent in April, which is below the current rate of inflation.

However, three key benefits will remain stagnant. These include the benefits cap, which sets a limit on the total amount each individual or household can claim; the capital limits figure, restricting benefits to those with significant savings; and local housing allowance (LHA), reports the Express.

LHA determines how much the government and local councils will contribute towards a claimant's rent and housing costs. A decision to freeze this figure means many people will effectively be priced out of living in many areas.

The benefit cap, introduced by the government in 2013, limits the total amount of benefits households can receive. Universal Credit, along with other benefits like child benefit, housing benefit and jobseekers allowance, counts towards the cap.

If your income exceeds this limit, your housing benefit or Universal Credit might be reduced. In Greater London, for couples (with or without children) or single people with a child of qualifying age, the cap is £25,323 a year.

For single adult households without children, it's £16,967. Outside of London, the limits are £22,020 and £14,753, respectively.

The benefit cap won't affect you or your partner if you: receive Universal Credit due to a disability or health condition that prevents you from working, or because you care for someone with a disability; are claiming working tax credit, even if you have a nil award; or are over Pension Credit age. You can use the Turn2Us benefits calculator to check whether you are affected by the benefit cap.

Capital limits restrict the amount of savings you can have before you stop receiving certain benefits, including Universal Credit and Housing Benefit. The lower limit remains at £6,000, meaning any savings below this will be disregarded for benefits calculations.

The upper limit is typically £16,000 and will not change, meaning if you have any savings over this, you won't receive any benefits. If you have between £6,000 and £16,000, you'll usually get a reduced amount, according to each benefit's taper rules.

If you earn more than £2,500 over the amount you can earn before your Universal Credit claim is stopped, these are considered surplus earnings. These surplus earnings are carried forward to the next month, where they count towards your earnings.

If your regular income and surplus earnings are still over the amount where your payment stops, your Universal Credit payment will be affected.

Next year, over one million private renters on Universal Credit will face a freeze in the assistance they receive towards payments. This is due to the Local Housing Allowance (LHA) rates remaining at their current level from April 2025.

The decision is set to affect around 1.6 million households, leading to an annual shortfall of up to £3,129 in areas with the highest rents. The LHA determines the maximum amount that individuals renting from a private landlord can claim in housing benefit or Universal Credit.

Rates fluctuate based on property size and location, and should theoretically match the lowest affordable housing rents in your area. However, rising rents and frozen rates mean households are left to cover more of their rent costs, as benefit payments have not kept pace.

In April this year, rates were increased to cover the cheapest 30% of local market rents, based on September 2023 values. This provided hundreds of thousands of households with an annual boost of up to £4,200.

Prior to this, rates had been frozen since 2020. The Resolution Foundation has warned that maintaining the LHA freeze in 2025/26 will leave renters with an average weekly shortfall of £14, or £730 annually.

This figure could rise to as much as £60 a week, or £3,129 annually, in areas with higher rents, such as inner London.