Good morning

Most Council and Housing Association rent control teams rely, at least partially, on rent deductions (Third-Party Payments) or the threat of them being applied, from their tenants’ state benefits, to help manage rent arrears and minimise the need for repossession actions. Some tenants accrue multiple debts that could attract deductions in respect of, for example, Advance Payments, Budgeting Loans, court fines, utility charges, overpayments, rent arrears, etc.

In 2024/25, DWP restricted the “maximum rate of deduction” to no more than 25% of that individual’s standard or personal allowance. Typically, that amounted to a potential deduction of £98 for a single claimant 25+ and £154 for a couple where one was at least 25 years old. Where tenants had multiple debts, DWP operated a pecking order, which ensured UC advance payments and budgeting loans were applied first. Thereafter, a hierarchy was applied to “Third Party Payments” with current rent arrears and service charges No 1 in that hierarchy.

However, with effect from 7th April 2025, DWP introduced what it calls its “Fair Repayment Rate” (FRR) regulations, which will, amongst other things:

  • Reduce the overall deductions cap from 25% to 15% of the standard allowance. In its explanatory note, it claims the change aims to ensure individuals on UC keep more of their benefits. Approximately 1.2 million Universal Credit households currently with deductions are expected to see an average of £420 more in their pocket per year, says GOV.UK.
  • The FRR also effectively demotes “rent arrears and “service charges” by giving higher priority to “child maintenance deductions”, thus ensuring they are deducted before any other “Third Party” debt, including “housing costs”.

The changes will undoubtedly impact all new applications for “rent arrear” deductions in both the social and private housing sectors and current arrangements, certainly in the longer term. What’s not clear, at this stage, is whether DWP plans to review and revise all existing arrangements to ensure immediate compliance with the new rules or, more likely, it will leave current arrangements in place until a change in circumstances forces a revision.

For example, if you’re currently receiving 20% rent arrears deductions for any tenants, that must, from April 2025, be reduced to no more than 15%. Similarly, if your tenant has a rent arrears (RA) deduction in place but also could potentially receive a “child maintenance” (CM) deduction, his/her case will need to be reconsidered under these new provisions. This may result in the RA deduction ending and being replaced by the CM one.

Tenants must be notified of any change to current arrangements, but most are unlikely to report this to their landlord. If on receiving notification they wish to dispute the decision, they can ask for a mandatory reconsideration and ultimately appeal. For example, DWP fails to apply the correct rate of deduction or pecking order.

Landlords, although entitled to be notified, are unlikely to told when a change is implemented, so they might have to wait until their next scheduled payment before fully appreciating its impact. At that point, they’ll need to re-engage the tenant in discussion about how they plan to repay their debt to avoid legal action.

As more detail emerges, I’ll update you via my bulletins and include a section relating to this in future training courses.  If more information is required, please email bill@ucadvice.co.uk or phone 07733 080 389.

Regards

Bill Irvine

UC Advice & Advocacy Ltd.

www.ucadvice.co.uk