The UK’s better-than-expected inflation recorded in September is a welcome surprise for many, but it comes at the wrong time for the millions of households in the country that claim benefits.
Headline CPI inflation rose by 3.8% in the 12 months to September 2025, above the 2% target range set by the government but unexpectedly below the previously forecasted figure of 4%.
Lower inflation is good news for those in the United Kingdom who are feeling under pressure from recent years’ price increases and the steadily increasing cost of living.
However, the timing of this unexpectedly positive performance means those millions of households who claim benefits will not receive as much of an increase to their benefit payments next year.
This is because the inflation rate in September is used to determine how much benefit payments are increased by the following April. Due to the unexpectedly stable inflation rate, the increase to benefits enacted in April 2026 will be less than previously forecast.
The Resolution Foundation calculated that the standard allowance will be uprated by at least 6.2% in spring 2026, which will be worth almost £6 per week to a single adult aged 25 or over that receives Universal Credit.
This uplift will be smaller than the 6.4% increase in the standard allowance that would have been used if September inflation aligned with the figures that had been widely forecast.
The foundation noted that while this might not come at the ideal time for those on benefits, any unexpected improvement in inflation is good news for British households feeling squeezed by prices.
Inflation being weaker than expected is also good news for those with mortgages, as it increases the chance that the Bank of England cuts rates in the near future.
“Price rises held steady at 3.8 per cent last month – a welcome downside surprise on inflation – but this unfortunately comes at the wrong time for millions of families receiving benefits,” said Resolution Foundation economist Lalitha Try.
“September’s inflation rate will be used to calculate benefit uprating in April next year, meaning that a single adult aged 25 and over receiving Universal Credit will see a nearly £6 a week boost to their standard allowance – less than if inflation had been 4 per cent as forecast.”
“This latest inflation rate is also key for the Bank of England ahead of its next policy meeting at the start of November. Here, there was good news for mortgagors with CPI inflation coming in below expectations, making an interest rate cut more likely,” Try said.
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