More than one million households struggling with debt will get to keep an average £420 more of their benefits each year, under a major change to Universal Credit that has come into force. The Fair Repayment Rate is a limit on how much you can have taken off your benefits to repay debts and the changes introduced this month mean more than one million Universal Credit claimants will keep £420 more of their benefits each year on average.

As many as 2.8 million households have money deducted from their Universal Credit to pay off debt each month, so reducing the Fair Repayment Rate will lessen the cap for individuals grappling with debt whilst on benefits.

The DWP can deduct money from someone's Universal Credit if they owe money, this debt will be listed on a Universal Credit statement and may include:

• Advances on benefit
• Universal Credit overpayment
• Tax credits and benefit overpayments, budgeting and crisis loan repayments
• Recoverable hardship payment
• Third party deduction - money for things owed to thrid parties like rent, Council Tax, electricity, gas, water or court fines

Rachel Reeves, Chancellor of the Exchequer, said: "As announced at the budget, from today, 1.2 million households will keep more of their Universal Credit and will be on average £420 better off a year. This is our plan for change delivering, easing the cost of living and putting more money into the pockets of working people.”

Liz Kendall, Work and Pensions Secretary, said: “As part of our Plan for Change, we are taking decisive action to ensure working people keep more of the benefits they’re entitled to, which will boost financial security and improve living standards up and down the country.

What is Universal Credit

Universal Credit includes a standard amount, with allowances made for work and childcare:

Universal Credit 

Standard allowance

• Single under 25: £316.98 a month
• Single 25 or over: £400.14 a month
• Joint claimants both under 25: £497.55 a month
• Joint claimants, one or both 25 or over: £628.10 a month

Child element

• First child born before April 6, 2017: £339 a month
• First child born on or after April 6, 2017 or second child and subsequent child: £292.81 a month
• Disabled child element lower rate: £158.76 a month
• Disabled child higher rate: £495.87 a month

Limited capability for work

• Limited capability for work: £158.76 a month
• Limited capability for work or work-related activity: £423.27 a month

Carer element

• £201.68 a month

Work allowance

• Higher work allowance (no housing amount): £684 a month
• Lower work allowance (with housing amount): £411 a month

Childcare costs element

• Maximum for one child: £1,031.88 a month
• Maximum for two or more children: £1,768.94 a month