Four London boroughs will be the first to see the benefit cap introduced.
It will be introduced in Bromley, Croydon, Enfield and Haringey and rolled out across the country throughout the summer. The cap will be in place across the whole country by summer 2013.
The Benefit Cap will see the amount people can receive in benefits capped at the average earned income after tax and National Insurance for working households of £500 a week for couple and single parent households – the equivalent of £26,000 per year.
It will apply to the combined income from JSA, Income Support, Employment and Support Allowance, Child Benefit, Child Tax Credits and other benefits.
Certain households including those with someone in receipt of Disability Living Allowance or the Support Component of ESA and war widows and widowers will be exempt. To increase the incentive for people on out-of-work benefits to find work, households with a member who is entitled to Working Tax Credit will also be exempt from the benefit cap
The Department for Work and Pension’s has allocated £100 million in Discretionary Housing Payments to help support vulnerable people affected by this change.
The cap was set by the Department for Work and Pensions at the level of average household income in the UK, but it has been criticised as this average figure does not include the benefits a family receives at this level of income.
Concern has also come from within the coalition government. Sarah Teather, Liberal Democrat MP and former minister, has said the cap will have a "horrible" and "traumatic" effect on people in her North London contituency.
Teather added: "I am frankly terrified about what is going to happen."
The DWP called the MPs comments "misinformed" and accused her of "scaremongering".