People on DWP Universal Credit might get free £1,200 money enhance from Sunday

The Help to Save scheme gives Universal Credit claimants the chance to earn a bonus of 50p for every £1 they save – and there’s a bonus at both the two and four year marks

Major changes to Universal Credit (UC) could mean claimants see a £1,200 boost as the new tax year rolls in. The government-backed “Help to Save” scheme pays low earners a 50% bonus on the amount saved.

The initiative was launched in 2018 by the then Tory Government as an incentive for low-income households to save and was due to end this month. However, Labour stepped in to extend the scheme for another two years, meaning it is due to be disbanded in April 2027.

Claimants can save between £1 and £50 into the account each month and can have the account for up to four years. Unlike a normal savings account, the Help to Save account doesn’t pay interest, and instead, it pays a 50% bonus up to £1,200.

So for every £1 put in the account, the government will boost it by 50p. If you keep paying into the account; at the two year mark, the government will pay a bonus of 50% of your highest balance throughout that time.

If you put in £50 a month for the next two years, you will have saved £1,200 of your own money. This means you will also be eligible for a tax-free bonus of £600. The government also pays another bonus at the four-year mark too – so you could get a boost of £1,200 overall.

Previously, you could open a Help to Save account if you got Working Tax Credit or Child Tax Credit, or you were claiming Universal Credit and earned a minimum of £793.17 from paid work in your last assessment period.

However, this has now changed, and anyone on Universal Credit who’s working and earning at least £1 will qualify for Help to Save. According to the latest figures from HMRC, more than 500,000 Help to Save accounts have been opened since the scheme launched in 2018, with a total of £492million paid in.

If you get Universal Credit or Tax Credit payments as a couple, you and your partner can still apply for your own Help to Save accounts, it’s not possible to open a joint account.

You can pay your monthly savings into the Help to Save account either by a standing order or bank transfer and you can access your savings at any time through your online account or through the HMRC app. You can make withdrawals from the account. However, the cash will arrive in three working days, so it’s probably not the best place to keep your emergency savings pots.

Depending on how much you withdraw and when, withdrawing money could also prevent you from earning a final bonus. This is because the first bonus you receive is on the final balance at the end of the first two years, and the second bonus is based on the difference between the highest balance in years three and four – and the highest balance during the first two years

For example, if you put in £1,000 over years one and two, you would receive a £500 bonus. However, if you then withdraw £400 but save a further £500 in years three and four – so £1,100 in total.

You will get a final bonus of £50 – as that is 50% of £100 – the difference between the two amounts of £1,000 and £1,100. But, if you only saved £400 rather than £500 in the final two years, there would be no bonus in year four.

Once the account is closed, it’s not possible to reopen it or start another Help to Save account. However, if you stop claiming benefits, the good news is you can keep using your Help to Save account as it is in place until the four year period ends.

The money you save in the Help to Save account will not affect your benefit claim. However, if the money in your Help to Save account, combined with other savings exceeds £6,000, your benefit payments might be reduced.

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