Benefits and tax credits that are linked to inflation rise by 1.7% in April 2020, marking the end of the four-year freeze that affected many such payments. Further increases have been made to Universal Credit, Working Tax Credit and Local Housing Allowance in response to the coronavirus outbreak. The triple lock delivers a 3.9% increase to the Basic and New State Pension.

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This note sets out the main benefit and tax credit rates for the 2020/21 financial year.

Indexation of benefits in line with the Consumer Prices Index (CPI) resumes for all inflation-linked benefits and tax credits this year, resulting in a 1.7% increase. This follows a four-year period (2015/16-2019/20) during which most working-age benefits (except for disability and carer’s benefits) were held at their 2015/16 cash value, and a three-year period before that (2013/14-2015/16) when increases were limited to 1% per annum.

In response to the coronavirus outbreak, the Government announced a further set of increases for 2020/21. Universal Credit standard allowances and the Working Tax Credit basic element were increased by £20 a week (just over £1,000 a year) and Local Housing Allowance rates were reset to the 30th percentile market rent in each area.

The Basic State Pension and New State Pension continue to be uprated in line with the triple lock that was introduced in 2012/13 – that is, by the highest of the increase in earnings, price inflation (as measured by the CPI) or 2.5%. For the purposes of the 2020/21 uprating, earnings growth (+3.9%) was the highest of these three benchmarks, meaning that:

  • the New State Pension (for those reaching State Pension age on or after 6 April 2016) will be £175.20 per week in 2020/21 (up from £168.60 in 2019/20)
  • the Basic State Pension (the core amount in the old State Pension system) will be £134.25 per week in 2020/21 (up from £129.20 in 2019/20).

Pension Credit Guarantee Credit is required to increase at least in line with earnings. In 2020/21 it will also rise by 3.9%.

  • Commons Research Briefing CBP-8806
  • Authors: Roderick McInnes, Steven Kennedy
  • Topics: Benefits, Pensions

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