Rachel Reeves announced during the Autumn Budget that she is eliminating the contentious two-child benefit cap. This policy restricts low-income families from receiving further means-tested benefits when they have a third or subsequent child born after April 6, 2017, impacting those on Universal Credit and Tax Credits.
Initially introduced by the Conservatives in April 2017, the cap has faced criticism from advocates who argue that limiting benefits is leading to increased child poverty. The cap is set to be removed starting in April 2026, with the Chancellor stating, “We do not believe in penalizing the most vulnerable children to fix a broken welfare system.”
The Office for Budget Responsibility estimates that ending the two-child benefit cap will incur a cost of £3 billion by 2029/30. In April 2025, a total of 1,665,540 children were affected by this cap, as reported by the Department for Work and Pensions (DWP).
Separate from the benefit cap, which places a limit on total benefit amounts, the two-child benefit cap has been a significant concern for many families. The NSPCC CEO, Chris Sherwood, welcomed the decision to scrap the limit, emphasizing the positive impact on children at risk of poverty.
The Institute of Fiscal Studies (IFS) predicts that affected families could have received an average of £4,400 annually if the cap had not been implemented. However, lifting the cap could potentially cost £3.6 billion per year, based on previous IFS estimates. Universal Credit claimants currently receive additional monthly payments, varying depending on the birth dates of their children.
Continued efforts to address child poverty are essential, as highlighted by various organizations and experts. Parents may receive payments until their child reaches 19 years of age if the child remains in full-time education or approved training programs.