Millions of benefit claimants are on course for at least a 3.5 per cent rise in their payments next April after inflation climbed to its highest level in almost a year.
The Office for National Statistics (ONS) said on Wednesday that the consumer prices index (CPI) rate of inflation – which tracks the change in prices of a typical basket of goods and services bought by households – rose to 3.5 per cent in September.
That was up from 3.1 per cent in August. Grant Fitzner, the ONS’s chief economist, said “increased fuel prices were again the main driver”, with the cost of diesel at its highest since July 2022.
September’s figure is the one ministers traditionally use to set benefit rates for the following year.
But the increase is not automatic, and governments have broken with the convention several times in the past 15 years.
And, by The i Paper’s calculations, most people on universal credit will see a larger rise of around 4.3 per cent, because of a law requiring the basic payment to go up faster than inflation.
The new rates are usually confirmed around the Budget, which Chancellor John Healey will deliver on 28 October.
Which benefits rise with inflation?
Every year, the Work and Pensions Secretary must check whether benefits have kept up with rising prices, and decide how much to raise them by.
For some benefits, there is no choice. The law says disability and carers’ benefits, such as personal independence payment and carer’s allowance, must rise at least in line with inflation.
For most other working-age benefits, such as child benefit, ministers can decide whether to raise them by inflation, by less, or not at all.
If they rise by 3.5 per cent, child benefit for the eldest child would go from £27.05 to around £28 a week. Carers’ allowance would go from £86.45 to around £89.50.
The state pension rises under the triple lock – by whichever is highest of September inflation, average earnings growth or 2.5 per cent.
Earnings growth of 3.9 per cent is higher than September’s inflation rate, meaning the full new state pension is set to rise from £241.30 to around £250.70 a week.
What will universal credit go up by?
Universal credit has its own rules. A law passed last year, the Universal Credit Act 2025, says the standard allowance – the basic monthly payment every claimant gets – must rise by more than inflation every year until 2029-30.
The policy was announced by Rachel Reeves, then chancellor, in March 2025. It was paid for partly by halving the extra health payment for most new claimants.
The extra boost works like a running total rather than a fresh bonus each year. By 2029-30, the standard allowance must be 4.8 per cent higher than if it had risen only with inflation.
That target is reached in steps. This year, the standard allowance was 2.3 per cent above where inflation alone would have left it. Next year, it must be 3.1 per cent above.
So claimants get inflation of 3.5 per cent, plus roughly 0.8 per cent extra to close the gap between those two steps. That adds up to a rise of around 4.3 per cent.
On today’s figures, the monthly standard allowance would rise as follows:
When have benefits not kept pace with inflation?
Most working-age benefits have risen with September inflation every year since 2020, but not always.
The biggest break came when George Osborne, then chancellor, froze most working-age benefits for four years from April 2016.
Claimants received no increase in April 2018, even though CPI had reached 3 per cent the previous September. The Resolution Foundation has estimated the freeze amounted to a real-terms cut of more than 6 per cent.
Before that, most working-age benefit rises were capped at 1 per cent a year from 2013.
In April 2022, benefits rose by 3.1 per cent, while inflation went on to peak at 11.1 per cent that October.
The health element for new universal credit claimants is already frozen at £217.26 a month until 2029-30, and local housing allowance rates remain frozen.