All the important changes you need to be aware of heading into the new year
Department for Work & Pensions changes are coming in 2025(Image: Kirsty O’Connor/PA Wire)
People are being advised to be aware of a number of key changes regarding benefits and pensions that will come into force next year.
There will be some key changes introduced regarding Department of Work and Pensions benefits and state pension arrangements in 2025. This will include the end of the department’s Managed Migration programme and the end of what are known as legacy benefits forever.
Here we take a look at some of the key dates to be aware of when it comes to benefits and pensions in 2025:
March – Household Support Fund to end
Under current plans, the government-funded Household Support Fund cost-of-living scheme will end on March 31 next year, reports The Mirror. Introduced by the Tory Government in October 2021, the scheme gave local councils funding to offer support to those most struggling with the rising cost of living in their area. Support offered through the scheme includes things such as cost of living payments, energy and supermarket vouchers, and discounts on council tax bills.
Labour extended the scheme for another six months in September with an extra £85million worth of funding. Labour has not committed to another extension at the time of writing. The scheme works on a first-come, first-served basis, and once a council’s allocated funding runs out, it’s gone for good. You should check your local council’s website for more information on the individual support they offer.
April – Benefits payments to rise
The chancellor confirmed in the October budget that working age benefits will be uprated by 1.7% from April 2025, in line with the September’s rate of inflation.
There are nine benefits which the Department for Work and Pensions (DWP) is legally required to increase in line with inflation each April, while other payments, including Universal Credit, are subject to Parliamentary approval. The benefits that are legally required to increase with inflation are:
- Personal Independence Payment (PIP)
- Disability Living Allowance
- Attendance Allowance
- Incapacity Benefit
- Severe Disablement Allowance
- Industrial Injuries Benefit
- Carer’s Allowance
- Additional State Pension
- Guardian’s Allowance
April 5 – Tax Credit benefits to close for good
Tax Credits are closing for good from April 2025, and all remaining accounts will be shut down. Thousands of Brits claiming Tax Credits will have received a Migration Notice over the last few years asking them to claim Universal Credit instead. Anyone still claiming payments at this time will lose them entirely this month – even if you have renewed the benefit for another year. The DWP website says: “Your 2024 to 2025 Tax Credits notices may show some predicted payments for the tax year 2025 to 2026. These are automatically generated and should be disregarded.”
Once you have made a claim for Universal Credit, you will have to wait five weeks until your first Universal Credit payment and you will continue to receive it going forward – unless your circumstances change.
April 5 – Deadline to top up state pension payments
The deadline to pay voluntary National Insurance Contributions (NICs) to top up your state pension falls on April 5, 2025. The original deadline was April 5, 2023, but this was extended until July 2023, and then again to April 2025 after a public awareness campaign, spearheaded by MoneySavingExpert.com founder Martin Lewis, caused phone lines to the Future Pension Centre to become jammed.
Under the current rules, you need 35 qualifying years on your National Insurance record – some people may need to more – to claim the full new state pension. If you have gaps in your record, you could receive much less than you expected, but you can purchase National Insurance years or claim free National Insurance credits to plug any holes.
Right now, you can buy back missing National Insurance years dating back to 2006, but after the deadline, you will only be able to go back six tax years. A top-up for a missed qualifying year currently costs £824 and boosts your pre-tax annual state pension entitlement by £302.
April 5 – Carer’s Allowance working limit to be lifted
From April, the amount carers can earn from work each week will rise, which means they can earn more and still claim the benefit. First announced in Labour’s first Autumn Budget, the rise will allow carers to work a further 16 hours a week at the minimum wage or £45 a week, bringing the limit to £196 a week.
Currently, Carer’s Allowance, which is claimed by around 1.4million people in the UK – is worth £81.90 a week and is awarded if you care for someone at least 35 hours a week. You can work alongside it, but you cannot earn over £151 a week after tax, National Insurance, pension contributions, and allowable expenses. If you earn even £1 over, then you lose your entire entitlement for the benefit.
September 1 – Free childcare for children under five
Eligible working parents of children from nine months to five years old will be entitled to 30 hours of childcare a week from September 2025. Currently, eligible working parents of children aged from nine months old to two years old can access 15 hours of free childcare a week, while parents of three and four-year-olds can access 30 hours of government-funded childcare.
To be eligible for the new hours, parents must earn a minimum of the equivalent of 16 hours a week at minimum wage, but less than £100,000 a year. This applies to both parents in a couple, as well as single parents. Free childcare hours are usually taken over 38 weeks (to cover term time) but you can normally spread it out to cover more weeks by using fewer hours a week. The free hours must be used with a registered childcare minder, such as some private nurseries or state-run pre-schools.
December – Employment Support Allowance (ESA) to end
As part of the DWP’s plan to move everyone claiming legacy benefits onto Universal Credit the final ones to move will be those claiming income-related ESA. All migration notices are set to be sent by the end of the year, and by December the transfer of people claiming ESA will be completed. From December, people claiming ESA will need to put in a claim for Universal Credit or Personal Independence Payment (PIP) if they fit the criteria.