DWP hits millions of Universal Credit claimants with deductions

Nearly half of all households receiving Universal Credit are now having money taken directly from their monthly payments.

Around 3.3 million households claiming the benefit experienced at least one deduction from their entitlement during February 2026, representing 46 per cent of the more than eight million people currently receiving Universal Credit across Britain.

The number of affected households has increased by 300,000 compared to the same period last year, as more claimants continue to move from legacy benefits onto the Universal Credit system, Department for Work and Pensions (DWP) figures show.

Officials said the increase reflects the growing number of people now claiming Universal Credit following the ongoing migration from older benefits including Housing Benefit, income-related Employment and Support Allowance and income-based Jobseeker’s Allowance.

Deductions are sums automatically removed from a claimant’s monthly Universal Credit payment in order to repay debts owed either to Labour or other organisations.

There are three main forms of deductions, including repayments of Universal Credit advance loans, money owed to third parties such as landlords or energy suppliers, and debts linked to Labour bodies including the DWP and HMRC.

Current rules mean the general cap on debt deductions is set at 15 per cent of a claimant’s standard allowance following changes introduced by Labour after Rachel Reeves’ first Budget in 2024.

Single claimants aged under 25 can currently have a maximum of £51 deducted each month, while those aged 25 and over face a ceiling of £64.

For couples where both partners are under 25, the maximum monthly deduction rises to £79, increasing further to £100 where either partner is aged 25 or older.

The DWP previously reduced the maximum deduction threshold from 25 per cent to 15 per cent under what ministers described as the Fair Repayment Rate scheme, with the Government saying the changes would leave 1.2 million of the poorest households better off by an average of £420 annually.

Ministers also said around 700,000 families with children would benefit from the lower deduction threshold.

However, poverty campaigners and welfare organisations have warned that the deductions continue to place severe financial pressure on struggling households despite the reforms.

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Policy in Practice said: "Deductions for debt repayments and sanctions routinely reduce the amount households actually receive, undermining financial security and pushing many households deeper into hardship.

"These reductions do more than lower income levels; they increase income volatility, making it harder for low income households to budget and plan ahead."

Campaigners also warned the financial impact of deductions can contribute to wider problems including rent arrears and housing insecurity for vulnerable claimants already facing rising living costs.

Rory Ewan, policy and practice analyst at Policy in Practice, said: "Universal Credit should be a foundation of financial stability, not a source of sudden shocks. Too often, what people actually receive falls far short of their entitlement.

"This gap isn't just unfair, it's driving up poverty, stress and housing insecurity."

Despite the Government’s Fair Repayment Rate reforms, Policy in Practice argued that further intervention is needed to prevent vulnerable households from falling deeper into financial difficulty.

"This change won't protect families from multiple cuts at once like the benefit cap, two child limit or bedroom tax.

"The Fair Repayment Rate is a step forward but it's not enough. Our findings show that without urgent reform, sanctions and deductions will keep pushing families deeper into poverty."

The latest DWP figures also revealed that around 21 per cent of Universal Credit households currently have deductions capped at the maximum 15 per cent threshold.