Millions of UK households will be handed an annual income boost worth £725 each following a change in the law, the government has announced.

As part of a hugely controversial shake-up of benefits, the government’s new Universal Credit Bill is set to boost the amount of money people on Universal Credit receive each year.

The government has announced that close to four million households will get an ‘annual income boost’ worth ‘£725 cash’ as part of the reforms. The government said: “Nearly 4 million households will see an annual income boost estimated to be worth £725 cash as a Bill to overhaul the welfare system completes the next stage of its passage through Parliament.

“For the first time ever, the Universal Credit standard allowance will permanently rise above inflation, amounting to £725 by 2029/30 in cash terms for a single person aged 25 or over.

“This is the highest permanent real terms increase to the main rate of out-of-work support since 1980, according to the IFS.”

But other changes will cut payouts in other areas. The health top-up for Universal Credit is being reduced to £50 a week from April 2026, reduced from £423.27 a month under the current Limited Capacity For Work Related Activity benefit.

New claimants who sign up for the “limited capability for work and work-related activity” payment will receive a lower rate than existing claimants after April 2026, unless they meet a set of severe conditions criteria or are terminally ill, a change which some rebel Labour MPs opposed in Parliament. 

Rachael Maskell, the Labour MP for York Central who was among them, had earlier said: “No matter what spin, to pass the Bill tonight, this will leave such a stain on our great party, founded on values of equality and justice.”

She warned that making changes to universal credit before a wider look at reform was putting “the cart before the horse, the vote before the review”, and branded the Government’s decision-making an “omnishambles”.

Independent MP Zarah Sultana, who quit Labour last week, spoke in the Commons for the first time since her decision, where she hit out at the Government.

The MP for Coventry South MP said: “The truth is this – Westminster is broken but the real crisis is deeper. This is a Government, not out of touch, but also morally bankrupt. It works for billionaires and big business while turning its back on disabled people.”

But the government defended its cuts, pointing to the £725 payment boost for Universal Credit.

Work and Pensions Secretary Liz Kendall said: “Our reforms are built on the principle of fairness, fixing a system that for too long has left people trapped in a cycle of dependence.

“We are giving extra support to millions of households across the country, while offering disabled people the chance to work without fear of the repercussions if things don’t work out.

“These reforms will change the lives of people across the country, so they have a real chance for a better future.”