In 2025, the UK government has reintroduced a one-time £500 financial support payment aimed at easing the economic strain on working families. This initiative specifically targets households that previously benefited from Tax Credits, especially Working Tax Credit, and now need extra help managing the rising cost of living.
This lump sum is tax-free and is designed to provide critical short-term relief, allowing families to meet essential expenses during challenging times. If you’re eligible, the money will be paid directly into your account, and there’s no need to apply.
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£500 One-Off Support Payment in the UK
The origins of this payment date back to the withdrawal of the temporary £20 per week increase in Working Tax Credit, which ended in April 2021. That additional weekly amount was introduced during the COVID-19 pandemic to support low-income earners but was later discontinued, causing financial concern for many families.
To address this, the government approved a special one-off payment of £500. It’s meant to compensate for that withdrawal and continue offering support to those who narrowly missed the income thresholds for continued Tax Credit support.
Many households were affected not just because their earnings were low, but also because they fell just above the qualifying income level, excluding them from additional aid. This new scheme is aimed at closing that gap and supporting families still in need of help.
Overview Table
| Payment Type | Timeframe | Amount | Purpose |
|---|---|---|---|
| One-Off Support Payment | Throughout 2025 | £500 | Provide assistance to former Tax Credit recipients |
| Cost of Living – Phase 1 | March – May 2025 | £301 | Help with recovery from winter energy and household costs |
| Cost of Living – Phase 2 | July – August 2025 | Up to £200 | Support for summer utility and childcare expenses |
| Cost of Living – Phase 3 | October – December 2025 | £500 | Support for winter holidays and seasonal essentials |
Eligibility Criteria
Eligibility for this payment is largely based on past receipt of specific tax credits. The criteria are straightforward and depend on your benefit status on a particular date.
Eligible groups include:
- Individuals who were receiving Working Tax Credit on 2 March 2021.
- Families who received Child Tax Credit but did not qualify for Working Tax Credit due to slightly higher income levels.
You do not need to apply separately. If you are eligible, HMRC will contact you automatically by letter or text message to confirm your entitlement.
The payment will then be made to the bank account on file from your original tax credit claim.
What Can You Use the £500 For?
This lump sum is flexible and can be used for a wide range of essential expenditures. The idea is to allow families to prioritise their most urgent financial needs.
Suggested uses include:
- Paying rent or mortgage bills
- Covering electricity, gas, or water charges
- Buying food, groceries, and household essentials
- Paying school fees or buying uniforms for children
- Purchasing winter clothing, heating appliances, or other seasonal items
It’s not a loan, so you are not required to repay it. Families are encouraged to use the funds where they are most needed.
Additional Cost of Living Payments in 2025
Aside from the one-time £500 support, the UK government has also rolled out phased Cost of Living Payments for eligible households. These payments are intended to cushion families throughout the year.
Breakdown –
Phase 1 (March–May 2025):
A payment of £301 will help families recover from higher winter bills, especially those related to energy.
Phase 2 (July–August 2025)
An amount up to £200 will be issued to assist with rising summer costs such as childcare and cooling expenses.
Phase 3 (October–December 2025):
A final payment of £500 is planned to support families during the festive season and colder months.
How Will the £500 Be Paid?
All payments will be made by direct bank transfer to the same account linked to your previous tax credit records.
Key actions to take:
If you believe you are eligible and haven’t received the payment, contact HMRC or DWP support services.nflation and economic uncertainty in 2025.
Ensure your bank details are current with the Department for Work and Pensions (DWP).
Notify the DWP immediately if you’ve changed your account or banking provider recently.
Final Thoughts
The UK government’s decision to provide a one-off £500 payment, alongside additional Cost of Living support, underscores its commitment to helping low-income and working families. While not a long-term solution, this initiative offers crucial relief at a time when everyday costs—from food to energy—continue to rise.
If you were previously receiving Tax Credits and meet the eligibility criteria, this support could significantly reduce financial stress. Stay informed, check your eligibility, and ensure your details are up to date to receive this assistance without delays.
FAQs
Q1: Who qualifies for the £500 one-off payment?
A = Anyone receiving Working Tax Credit or Child Tax Credit on 2 March 2021.
Q2: Do I need to apply for the payment?
A = No application is required—HMRC will contact eligible recipients.
Q3: How will the money be sent?
A = It will be paid directly into your registered bank account.
Q4: What if my details are outdated?
A = Update your information through the HMRC portal to prevent payment issues.
