Guidance

LA Welfare Direct 5/2025 lite

Updated 2 June 2025

© Crown copyright 2025

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This publication is available at https://www.gov.uk/government/publications/la-welfare-direct-bulletins-2025/la-welfare-direct-52025-lite

LA Welfare Direct lite 16 May 2025 

Crown Copyright 2025 

Recipients may freely reproduce this bulletin.  

Contact

If you have queries about the: 

  • technical content of this bulletin then contact details are given at the end of each article 

  • general content distribution of this bulletin, contact lawelfare.correspondence@dwp.gov.uk

Who should read

All Housing Benefit staff and wider if appropriate

Action

For information

HB debt recovered by the Department for Work and Pensions’ Debt Management: New cap on deductions from Universal Credit

1. As announced in the Autumn Budget 2024, deductions from Universal Credit (UC) payments would be capped at 15% of the claimant’s standard allowance, down from the previous maximum rate of 25%.  

2. This change came into effect on 30 April 2025 in the Department for Work and Pensions (DWP) and applies to all current cases with ongoing deductions from UC.  

 New deduction rate cap 

3. Previously, deductions could reach up to a maximum of 25% of a claimant’s standard allowance of UC. From 30 April 2025, the maximum amount that can be deducted from a claimant’s standard allowance of UC to cover debts or other deductions is reduced to 15% of their standard allowance. This new deduction rate cap is an overall cap against all deductions which can be taken from a customer’s standard allowance of UC.   

Change in deductions before the priority order is applied  

4. There has been a change in the priority order in which deductions are taken first. Previously flat rate maintenance was prioritised in the deductions priority order. However, it is now considered before the priority order is applied. 

5. This will not affect the current position for recovery of Housing Benefit (HB) debts. 

Deductions taken before the priority order is applied 

6. The following updated list of deductions are taken before the priority order is applied (in order of precedence): 

  • Fraud Penalties 
  • Conditionality Sanctions 
  • Short term advance (UC Advance: new claim or change of circumstances) 
  • Flat Rate Maintenance  
  • First month advance (UC Advance: benefit transfer) 
  • Budgeting Advance 

Deductions priority order  

7. Deductions are taken in the following order of precedence: 

  • Last resort deductions 
    • Owner/occupier service charge arrears (where the lender is not part of MID (Mortgage Interest Direct) scheme) 
    • Rent and/or service charges arrears (minimum deduction rate of 10%) 
    • Gas arrears (electricity arrears can come above gas arrears, if required)  
    • Electricity arrears 
  • Enforcing social obligation deductions 
    • Council Tax or Community Charge arrears 
    • Fines or compensation orders 
    • Water charges arrears 
  • Ensuring recovery of benefit debt deductions 
    • Social Fund loans 
    • Recoverable Hardship Payments 
    • HB and DWP Administrative Penalties 
    • HB, tax credit and DWP fraud overpayments 
    • HB and DWP Civil Penalties 
    • HB, tax credit and DWP normal overpayments 
  • Enforcing social obligation deductions 
    • Integration Loan arrears 
    • Eligible Loan arrears 
    • Rent and / or service charge arrears (maximum deduction rate of no less than 10% and no more than 20%) 

8. If you have any questions about this article, contact caxtonhouse.lapedpdpsupport@dwp.gov.uk

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