The following benefit changes include War Pensions to Veterans are set to take place in 2016, some may be subject to change or approval.

Benefit and Tax Credit rates frozen

The main rates of working age benefits and tax credits will be frozen in cash terms for 4 years from April 2016. Pensioner benefits are excluded from the benefit freeze and will be protected by the ‘triple lock’.  Disability benefits, the disability-related elements of tax credits and statutory payments will be uprated in the normal way in line with the Consumer Prices Index; these benefits include: Personal Independence Payment, Attendance Allowance, Disability Living Allowance, Employment and Support Allowance (Support Group only), Maternity Allowance, Statutory Maternity/Paternity Pay and Statutory Sick Pay.

Update: In September the Consumer Prices Index was announced to have fallen in the year to September 2015. This means that those benefits that are increased in line with this measure will not see an increase when the new benefit rates for 2016/17 are released (unless a different measure is used).

Benefit cap reduced

There is currently a benefit cap in place restricting the amount in certain benefits that a working age household can receive. Any household receiving more than the cap has their Housing Benefit reduced to bring them back within the limit. This cap of £26,000 per year is to be reduced to £23,000 for households living in London and to £20,000 for those outside London. For further details see our Benefit Cap reduction April 2016 help page.

Housing Benefit changes

Unlike other reforms the Chancellor announced directly affecting child related payments, withdrawal of the family premium in Housing Benefit (£17.45 when a claimant has one or more dependant children) will take effect from 1 May 2016, a year earlier than the reductions for children within Child Tax Credit. Removal of the family premium will affect both new claims and new births from 1 May 2016. For further details see our Family premium abolished May 2016 help page.

Housing Benefit backdating will be reduced so that new claims from working age claimants will be backdated for a maximum of four weeks. Currently, if you are working age, your Housing Benefit claim can be backdated for up to six months if you can show good cause for making a late claim and you would have qualified for the benefit sooner.

Tax credit allowance and taper cut

At the moment working households receive the maximum amount of tax credits for their circumstances until they reach an ‘income threshold’ of £6,420. This will be reduced to £3,850 from April 2016. At the same time the ‘taper rate’ will be increased from 41% to 48% so all tax credit claimants will lose more of their benefit for every £1 they earn over the income threshold. The effect will be that any working household receiving tax credits with an annual income of more than £3,850 a year will be worse off.

Update: On 25th November 2015 during the Chancellor's combined Autumn Statement and Spending Review, he announced that the tax credit changes described above would in fact not be going ahead. This is in response to a House of Lords vote in October that the tax credit changes be delayed and transitional protection considered for those affected

Tax credit income disregard cut

At the moment, if your household income increases by up to £5,000 during the tax year this increase is ignored when calculating your entitlement for that year. From April 2016 this will be reduced so that any increase in income of more than £2,500 will be taken into account.

Single tier State Pension

For those reaching pension age from 6 April 2016 a new single tier state pension is being introduced to replace the basic state pension and state second pension. This affects all women born on or after 6 April 1953 and all men born on or after 6 April 1951. The new pension is designed to be much simpler than the current system and will consist of a single amount to be awarded in full if you have 35 qualifying years of National Insurance contributions. If you don't have the contributions required for the full pension, as long as you have a minimum number of qualifying years (between 7 and 10) you will receive a pro rata amount. If you don't have the minimum number of qualifying years you will not qualify for the single tier pension. Any contributions made under the current pension system can be used toward the new single tier pension.

The rate is yet to be set but will be higher than the Pension Credit minimum guarantee, so at least £148.40. For those who do gain in state pension income, for some this will be offset by reductions in means-tested benefit entitlements and if you fall under the new single tier pension system you will not be able to claim the Pension Credit savings credit. To find out more see Age UK's 'what the new pension reforms mean for you'

Universal Credit changes

The work allowance in Universal Credit, the amount you can earn without your benefit being affected, will be reduced from April 2016. For disabled people and people with children it will be reduced to £192 per month if you have housing costs and £397 per month if you don’t have housing costs. The work allowance will be abolished altogether from April 2016 for non-disabled, childless claimants meaning your benefit is reduced as soon as you start earning.

Other changes

National Minimum Wage increased

The National Minimum Wage will be 'rebranded' as the National Living Wage and will be increased to £7.20 per hour for those 25 or over from April 2016. It will reach £9.00 per hour by 2020. 

Personal tax allowance increased

The Personal Tax Allowance, the amount you can earn before paying income tax, will be increased from £10,600 to £11,000 from April 2016. It will be further increased to £12,500 by 2020 and thereafter it will automatically be set at the same level as 30 times the National Living Wage (National Minimum Wage).

Rent changes for social tenants

From April 2016 social housing rents will be reduced by 1%, or in some exceptions frozen, for four years.

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