Universal Credit rebalancing reforms

Overview¶

1. Health element changes for new claimants: New Universal Credit claimants from April 2026 onwards receive a fixed health element amount, while existing claimants continue to receive inflation-linked increases.

2. Standard allowance uplifts: The standard allowance receives additional uplifts beyond the annual inflationary increase from 2026-2029.

Health element changes¶

From April 2026, new Universal Credit claimants who qualify for the Limited Capacity for Work-Related Activity (LCWRA) element receive a fixed monthly amount of £217.26, rather than the inflation-adjusted amount that pre-2026 claimants continue to receive.

The implementation uses transition probabilities based on WPI Economics analysis for the Trussell Trust, derived from administrative Personal Independence Payment data. The probability of being a new claimant varies by year:

• 2026: 11%

• 2027: 13%

• 2028: 16%

• 2029: 22%

Standard allowance uplifts¶

The standard allowance receives additional percentage uplifts beyond the normal inflationary increase:

• 2026: 2.3% additional uplift

• 2027: 3.1% additional uplift (cumulative)

• 2028: 4.0% additional uplift (cumulative)

• 2029: 4.8% additional uplift (cumulative)

These uplifts are applied to the previous year’s standard allowance amount and compound over time.

Implementation¶

• Parameters: Three YAML files define the reform’s activation status, health element amount for new claimants, and standard allowance uplift rates.

• Scenario modifier: The add_universal_credit_reform function applies the changes to Universal Credit calculations during microsimulation.

• Scenario: The universal_credit_july_2025_reform scenario enables the reforms in policy analysis.

Examples¶

You can use these reforms in your own analysis by creating a Simulation with parametric changes to modify the reform parameters.

Disabling the rebalancing reforms entirely¶

from policyengine_uk import Simulation, Scenario

# Disable the reforms from 2026 onwards
scenario = Scenario(parameter_changes={
    "gov.dwp.universal_credit.rebalancing.active": False,
})

sim = Simulation(scenario=scenario)

Changing the standard allowance uplift parameters¶

from policyengine_uk import Simulation, Scenario

# Set different uplift rates - e.g. 5% in 2026, 7% in 2027
scenario = Scenario(parameter_changes={
    "gov.dwp.universal_credit.rebalancing.standard_allowance_uplift": {
        "2026-01-01": 0.05,
        "2027-01-01": 0.07,
        "2028-01-01": 0.07,
        "2029-01-01": 0.07
    }
})

sim = Simulation(scenario=scenario)

Changing the health element amount for new claimants¶

from policyengine_uk import Simulation, Scenario

# Set the new claimant health element to £250 per month
scenario = Scenario(parameter_changes={
    "gov.dwp.universal_credit.rebalancing.new_claimant_health_element": {
        "2026-01-01": 250.00
    }
})

sim = Simulation(scenario=scenario)

Legislative reference¶

The reforms are based on provisions in the Universal Credit Bill, available at: https://bills.parliament.uk/publications/62123/documents/6889.