DWP and HMRC benefits and pension changes expected in the Autumn Budget

The government is expected to announce significant changes for people claiming benefits and state pensions this week.

Chancellor Rachel Reeves will deliver her first Autumn Budget on Wednesday, October 30, as Labour's plans for taxation and spending are revealed.

The government is expected to confirm how much benefits and state pensions will rise by in April next year, with a rise of around £470 for some pensioners on the cards.

READ MORE: Four Autumn Budget tax changes expected this week and what they mean for you

Announcements on welfare reform and pension tax could also come in the Autumn Statement, which will be delivered to MPs in the House of Commons. Meanwhile, some of the poorest Universal Credit claimants could be in line for a boost due to a new cap on deductions.

Here are five announcements on benefits and pensions to look out for.

Benefits and state pensions to rise in April 2025

Ms Reeves is expected to confirm how much benefits, such as Universal Credit and PIP, and state pensions will rise by in April 2025.

The state pension is expected to rise by 4.1 per cent under the triple lock guarantee, giving pensioners on the new state pension a boost of around £470 a year.

Under the triple lock, payments rise in line with earnings growth, September's rate of Consumer Prices Index inflation, or 2.5 per cent - whichever is highest. Lower inflation this year means pension payments are set to rise in line with earnings growth, which was 4.1 per cent up to July this year.

A 4.1 per cent state pension rise would see around £470 extra a year handed to those on the new state pension. The new state pension, for people who reached state pension age after April 2016, would rise from £221.20 per week to £230.30 next year, while the old basic state pension would increase from £169.50 per week currently to £176.45 next year.

However, benefits such as Universal Credit, PIP, Carers Allowance and Child Benefit could be in line for a much lower increase due to falling inflation.

Benefits paid by the DWP and HMRC do not have the triple lock guarantee and usually rise in line with inflation. September's inflation figure, which was used to calculate the 6.7 per cent rise last year, stood at 1.7 per cent this year.

Charites have called on the government to apply a higher increase to benefits, arguing that a 1.7 per cent increase would be worth "just a few pounds" each month. The rise would see a typical low-income family with two children seeing their annual award increase by just £253.

Iain Porter from the Joseph Rowntree Foundation said "millions" of families in the UK are already struggling to afford food or put the heating on. "The basic rate of Universal Credit is so insufficient it fails to protect families from hardship, and this increase will barely touch the sides," he said.

New cap on Universal Credit deductions

Some households who are on Universal Credit could see their income boosted by around £420 a year thanks to a new cap on the amount the government can deduct from benefit payments.

According to The Guardian, a new Fair Repayment Rate will cap the amount that can be taken from benefit payments each month to repay short-term loans and debts. The change is expected to be announced in this week's budget and come into force next April.

The current cap on monthly deductions is 25 per cent of a claimant's standard allowance, but the new rate would reduce the cap to 15 per cent. The move would help 1.2 million of the UK's poorest households, the paper reports.

Children's charity Save the Children UK told The Guardian it would have a "significant impact for families and put more money in their pockets for food, toys, clothes and books".

Changes to DWP work capability rules

Ms Reeves could be set to announce big changes to work capability assessments, which determine whether a benefit claimant who has a health condition or disability is able to work, and whether they are eligible for additional top up payments if they claim Universal Credit.

The previous Conservative government planned to raise around £3 billion by tightening the rules so that around 400,000 more people who are signed off long-term would have to prepare for employment by 2028/29. The Labour government now looks set to honour the initiative with their own plans to reform the system and reduce the benefits bill.

A spokesperson for the government said: "We have always said that the Work Capability Assessment is not working and needs to be reformed or replaced alongside a proper plan to support disabled people to work. We will deliver savings through our own reforms, including genuine support to help disabled people into work."

Changes to pension tax rules

Reports suggest Ms Reeves could be looking to change the rules around how pensions are taxed.

The Telegraph reported that the government could decide to slash the tax-free lump sum that people can take from their pensions.

Under current rules, savers can take 25 per cent of their pensions as a tax-free lump sum up to a cap of £268,275 from the age of 55. However, there have been suggestions that the Treasury is looking to lower the cap to £100,000, potentially raising £2 billion for the government.

In addition, while savers currently receive tax relief on their pensions at their current tax rate, Ms Reeves is said to be considering a flat rate of pension relief, at 30 per cent. This would hit higher rate taxpayers particularly hard, given they currently receive relief at 40 per cent.

HMRC crackdown on tax evasion

The government looks set to announce a new crackdown on tax evasion and tax avoidance, which could raise £6.5 billion extra for the Treasury.

The Mirror reports that Ms Reeves will announce plans to end the practice of ‘phoenixism’ - business owners closing down a company that can’t pay its tax debts only to reopen operations under a different name. The Treasury believes the practice costs the country half a billion a year in lost revenue.

HMRC will reportedly be given a £16 million boost to improve its app so that people can make voluntary self-assessment payments in instalments, benefiting millions of small business owners.