UK cost of living payments explained: How much, when, and who is eligible?

The UK government is offering payments to help its residents cope with the increased cost of living.

As the UK experiences a surge in inflation beyond 9%, the cost of fuel is perilously close to £2 a liter, and the overall cost of travel, goods, food and services continues to climb, the majority of UK citizens are feeling the sting. 

The cost of energy, in particular, is becoming a painful subject for many. Cornwall Insight predicts that the price cap — originally designed to protect consumers from short-term fluctuations in price — will be hiked by 65% to £3,240, an amount that few will be able to manage without help. 

There are payments and grants available, and here's what you need to know about them. 

UK cost of living payments explained

The UK government announced a £37 billion support package, including cuts to fuel duty and support payments. In the first wave, £650 will be deposited in the bank accounts of individuals who qualify. The payments are tax-free. 

The first cost of living payment

The first payment of £326 is beginning to appear — both clear and pending — in bank accounts now, automatically. You should see it by July 31, but contact your local council for assistance if you don't. You will see the payment made on your bank account under the reference DWP Cost of Living. 

However, if you only receive tax credits, the schedule is different. The first payment will be made in autumn, followed by another around Christmas, but the dates are yet to be made public. 

A second payment is coming 

The second payment of £324 will be due in autumn, although there is no definite date yet when it will land.  

Energy bill grants

Initially, the former UK Chancellor Rishi Sunak offered the public a “discount” of £200 off their energy bills this year. However, the scheme was widely condemned as a “loan-not-loan” that you could not opt-out of and would have to pay back at £40 per year — even if you didn't receive it. 

Now, every household in England, Scotland, and Wales will be part of the “Energy Bills Support Scheme“. Unlike the cost of living payments, this won't be landing in your bank account. Instead, £400 of credit will be added directly to your energy provider account. As a bonus, however, you won't have to pay this one back. 

You don't need to apply for this grant, and it's expected to appear on your account in autumn. If you are on a pre-payment meter, you will likely receive a voucher instead, although the details are still being debated. 

Renters are also complicated. If you pay your landlord for energy use, for example, you won't necessarily benefit. There are also cases when individual energy meters are installed in houses of multiple occupancy (HMOs) — and there is no word, as of yet, how these challenges will be dealt with. 

Winter fuel payments

Winter Fuel Payments were introduced to help pensioners and a smaller group of people on fixed incomes deal with the extra cost of heating their homes during the colder months. 

Usually, you have to have been born on or before September 25, 1956, to apply. 

The government says a further £300 may be offered to pensioners from autumn as a one-off payment. The winter fuel discount scheme typically ranges from £250 to £600, depending on eligibility. 

If you receive the state pension, the payment is made automatically. Alternatively, you need to make a claim if you think you have a case for additional help.