Conservatives say the four-year freeze on benefits increases will come to an end in April next year.
Work and Pensions Secretary Therese Coffey said: "We're clear the best way for people to improve their lives is through work, but we know some people require additional support.
"Our balanced fiscal approach has built a strong economy, with 3.6 million more people in work since 2010. And it's that strong economy which allows us to bolster the welfare safety net by increasing benefit payments for working-age claimants now."
But Labour described the news as “cynically timed” during the tightly-contested election campaign, and pointed out that the freeze would still take several months to come into effect.
How much will benefits rise by?
The freeze, which was introduced in 2016 and was scheduled to finish at the end of this financial year, is estimated to have cut £560 per year from the income of the poorest seven million families in the UK, according to a report by the Institute for Fiscal Studies.
Getting rid of the freeze means welfare payments like jobseekers allowance and Universal Credit will rise in line with the CPI (Consumer Price Index) rate of inflation - currently 1.7% - every year.
Other benefits will also see a rise in line with inflation - including employment and support allowance, housing benefit, child tax credits, working tax credits, and child benefit.
The cost of the rise is estimated to be around £5bn.
Adam Corlett, a senior analyst at the Resolution Foundation, told the BBC that the announcement was a "missed opportunity" that would not help low income families raise their living standards.
"The benefit freeze was always due to end next year. The government's confirmation that working-age benefits will only keep pace with rising prices means there will be no increase in living standards, and those in need of extra support will continue to be left behind," he said.
"With child poverty at risk of hitting record highs, this is a missed opportunity to provide a much-needed boost for low to middle income families."