The Department for Work and Pensions (DWP) has confirmed that 57,000 benefit claimants will receive compensation payments of up to £5,000.
The payments follow successful court rulings between 2018 and 2019, and the DWP's unsuccessful appeal at the Court of Appeal in 2020.
The compensation is for claimants who lost their severe disability premiums when moving from legacy benefits to Universal Credit.
The scheme was announced earlier this month after the DWP settled a case brought by law firm Leigh Day on behalf of 275 individuals.
The department has already begun processing payments to thousands of eligible customers. The law firm estimates that total payouts could reach as high as £5,000 per person.
As the base rate remains at 5.25 per cent, Britons are urged to get the highest interest possible for their savingsGETTYLeigh Day secured a significant victory in the High Court for clients TP and AR, proving that the loss of severe disability premium (SDP) and enhanced disability premium (EDP) was illegal.
This led to the DWP establishing the SDP Gateway in January 2019, which protected claimants from immediate reductions of up to £180 monthly when moving to Universal Credit.
The monthly income loss in these cases amounted to approximately £180, according to court findings. Compensation payments are expected to range from a few hundred pounds up to £5,000 per claimant.
Individual applicants in the initial Leigh Day case were awarded between £200 and £3,000 in damages.
Neil Couling, the DWP's Director General for Fraud, Disability and Health, outlined three groups eligible for compensation.
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The first group includes those due additional transitional SDP element payments from 2020 onwards who still receive Universal Credit.
The second group of approximately 15,000 people are those due additional amounts between 2018 and 2020 who continue to receive Universal Credit.
A third group of around 7,000 people includes those due payments from 2018 onwards who no longer receive Universal Credit. Around 35,000 are expected to receive payments earliest, as their cases can be handled automatically through the digital system.
The second and third groups face longer processing times due to their "mixed clerical and digital records," which the department needs to find a solution to address. The DWP aims to complete the compensation scheme by August this year.
The payments are specifically for those who were receiving legacy disability benefits and moved to Universal Credit before September 2019.
Ryan Bradshaw, who represented the claimants, said: "I am glad to have settled this claim on behalf of my clients. However, there are thousands of others who have been similarly affected who have not been in a position to bring a claim like this."
Couling explained to MPs at a Work and Pensions Committee meeting: "The courts have decided on all of these, and we are now moving to implement the various judgements of the courts in those cases.
"Because the courts decided that the transitional protection we were providing was not large enough, it needed to cover other elements."
A DWP spokesman said: "We have already started paying the money owed to all eligible customers who have moved to Universal Credit from the Enhanced Disability Premium."
Eligible claimants will be contacted by the DWP directly regarding their compensation payments.
The payments follow the department's commitment to resolve the matter after the court rulings established that previous transitional protections were insufficient.
The DWP has confirmed it has begun the process of compensating all affected claimants across the three identified groups.
