The BBC licence fee will go up next year – from an annual fee of £159 to £169.50.
Culture Secretary Lucy Frazer also told MPs she was launching a review of the BBC’s funding model as she announced the 6.7% increase.
The fee had been frozen and was set to increase by 9% from April 2024, meaning a hike of around £15.
However, Ms Frazer has settled for a smaller £10.50 rise.
The rise is based on the consumer prices index (CPI) inflation rate from September.
The culture secretary said the licence fee would now increase annually in line with CPI.
“The government is committed to supporting families as much as possible during these difficult times,” she said.
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“We recognise bill rises are never welcome and family budgets remain under pressure.”
Mr Frazer said the fee was being “kept as low as possible” and that the upcoming rise amounted to an extra 88p a month.
She said the BBC was already feeling the impact of people cancelling their TV licence, with 400,000 fewer taken out last year, and 1.7 million fewer compared with 2017-18.
There have long been questions over the future of the fee, with many subscribing to monthly services such as as Netflix and regular TV viewing declining.
Mr Frazer appeared to indicate that a major change is not far away.
“Reach and viewing of broadcast TV fell significantly in 2022 with reach falling from 83% in 2021 to 79% in 2022,” she said.
“As this trend continues, linking the TV licence to watching live TV will be increasingly anachronistic as audience viewing habits continue to move to digital and on-demand media.
“We know that if we want the BBC to succeed we cannot freeze its income but at the same time we cannot ask households to pay more for the BBC indefinitely.”
She said the government was supporting the BBC to “realise commercial opportunities which will make it more financially sustainable”.
