The budget has a range of benefits related measures, including VAT on Motability top-ups, an additional 122,000 Work Capability Assessments for existing claimants, benefits uprating at 3.8% and the ending of the two child limit.
Motability
VAT relief for top-up payments made to lease more expensive vehicles will be removed for new leases from July 2026, so VAT will be payable at 20% on top-ups.
Insurance Premium Tax will apply at the standard rate of 12% to insurance contracts on the Scheme.
These tax changes will not apply to vehicles designed for, or substantially and permanently adapted for, wheelchair or stretcher users.
Motability will remove luxury vehicles from the scheme, discontinue the inclusion of overseas breakdown cover and reduce their lease mileage limit. The government say that this will bring Motability leases more in line with those available commercially to most people.
Together, these measures are expected to save just over £1bn by 2030.
Benefits uprating
Working age benefits will be uprated in line with the September CPI inflation of 3.8% from April 2026.
Rates for the Universal Credit Standard Allowance and Health Element remain set in legislation until April 2029.
Assessments
The DWP will conduct an additional 122,000 Work Capability Assessments for existing claimants by 2029-30 to ensure people are receiving the right level of support.
They are also extending Personal Independence Payment award reviews periods and increasing face-to-face health assessments.
Together, these measures are expected to save £1.95bn by 2030.
Two-child limit
The two-child limit in the Universal Credit Child Element will be removed from April 2026.
It is estimated that there will be 600,000 fewer individuals in relative low income after housing costs in 2030 as a result. This includes 450,000 children and 150,000 working age individuals.
It is also estimated that by 2030, two million children will live in households that see an increase in income as a result of the removal of the two-child limit within Universal Credit.
Fraud and error
The government will extend Targeted Case Review that identifies incorrect Universal Credit claims to 2031, saving an additional 1.3 billion.
Prescription charges
NHS prescription charges in England will be frozen in 2026-27 with the cost of a single prescription remaining at £9.90.
Minimum wage
From 1 April 2026, the National Living Wage will increase by 4.1% to £12.71 per hour.
The National Minimum Wage for 18-20 year olds will also increase by 8.5% to £10.85 per hour and for 16-17 year olds and apprentices by 6.0% to £8.00 per hour.
