Thousands of benefit claimants across the UK have unknowingly had money deducted from their Universal Credit payments after landlords used Department for Work and Pensions (DWP) powers to recover unpaid rent. The practice, designed to prevent rent arrears spiralling out of control, has been ruled unlawful by the High Court exposing serious flaws in the system and leaving many tenants struggling to afford basic living costs.

How Landlords Can Access Your Benefits

Under a long-standing but little-known system, landlords particularly social housing landlords have been able to apply directly to the DWP to have rent arrears paid from tenants’ Universal Credit or Housing Benefit without tenants’ knowledge or consent.

Known as third-party deductions the scheme was initially created as a safety net. Landlords could request deductions if a tenant had fallen behind on rent payments, with the DWP able to approve requests and automatically deduct up to 20% of a claimant’s Universal Credit standard allowance.

The system was used extensively by social landlords, including councils and housing associations, but also available to private landlords in certain cases. It was intended to prevent evictions and secure rental income, but critics argue it has left vulnerable tenants financially trapped and unable to challenge deductions effectively.

Court Rules Deductions ‘Unlawful’

In January 2025, the High Court ruled that the DWP’s automatic approval process for these deductions was unlawful. The court found that the DWP had been failing to allow tenants the right to make representations before deductions were approved, which breached principles of fairness and natural justice.

The landmark case was brought by a Universal Credit claimant who discovered that her payments had been reduced without notice, after she withheld rent during a dispute over disrepair in her flat. The court ruled that the DWP’s policy effectively gave landlords unilateral power over tenants’ benefit payments, without proper scrutiny or consent.

You can read the full court ruling and government response on the GOV.UK Universal Credit third-party deductions guidance page.

DWP Announces Reforms

In the wake of the court ruling, the DWP confirmed it would overhaul the deduction process to ensure claimants are treated fairly. In a statement, the department said it would “introduce safeguards that allow tenants to be consulted and given the chance to challenge deductions before they are made.”

The reforms will include:

• Reducing the maximum deduction cap from 25% to 15% of a claimant’s standard allowance starting April 2025.
• Introducing a formal right for tenants to make representations before deductions are approved.
• Improving transparency so claimants are notified when deductions are requested.

These changes are expected to benefit more than 1.2 million households who have experienced deductions to their benefits. You can find the official DWP announcement on GOV.UK.

Tenants Left in the Dark

For many tenants, the automatic deduction system has caused serious financial hardship. Some reported falling behind on other bills or struggling to afford food and essentials after discovering large sums missing from their monthly benefit payments.

Advocacy groups and charities have long warned that the scheme lacked transparency and disproportionately affected low-income and vulnerable tenants.

Jon Sparkes, Chief Executive of Crisis, said:
“This ruling exposes how the system has been tilted in favour of landlords, leaving tenants powerless and in debt without even knowing why money was missing from their benefits.”

Landlord Reaction

While tenant groups welcomed the court’s decision, social landlords and private landlords expressed concern that the reforms could make it harder to recover unpaid rent and increase the risk of evictions.

The National Residential Landlords Association (NRLA) said in a statement:
“We recognize the need for fairness, but it is crucial that rent arrears do not spiral out of control. The government must balance the rights of tenants with the need for landlords to receive rent in a timely manner.”

Landlords are being encouraged to engage directly with tenants in arrears, rather than relying on benefit deductions as a first option.

What Tenants Should Do

If you receive Universal Credit or Housing Benefit, here’s how you can protect yourself:

• Check your Universal Credit journal regularly to monitor any deductions. You can access your account via the Universal Credit Sign In.
• Contact your Work Coach or the DWP immediately if you believe a deduction has been made unfairly.
• Seek advice from organisations like Citizens Advice (citizensadvice.org.uk) or Shelter (shelter.org.uk) if you need help challenging a deduction.
• Engage with your landlord early if you are struggling to pay rent. Communication can help prevent escalation.

Conclusion

The court ruling against the DWP’s automatic rent deduction scheme has exposed how a policy intended to protect both landlords and tenants instead left many vulnerable people worse off. While the new reforms promise greater fairness, transparency, and tenant involvement, the case highlights a deeper issue how complex and opaque systems can strip people of control over their own income without them even knowing.