Rachel Reeves has announced during the Autumn Budget that she will eliminate the contentious two-child benefit cap. This cap restricts low-income families from accessing additional means-tested benefits when they have a third or subsequent child born after April 6, 2017, impacting those receiving Universal Credit and Tax Credits.
Initially implemented by the Conservatives in April 2017, the policy has faced criticism from advocates who argue that limiting benefits is driving many children into poverty. The Chancellor has revealed that the cap will be removed starting from April 2026, emphasizing a stance against penalizing the most vulnerable children within the welfare system.
According to the Office for Budget Responsibility (OBR), the removal of the two-child benefit cap is projected to 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).
Distinct from the benefit cap, which sets a maximum limit on total benefit amounts, the two-child benefit cap has drawn attention for its impact on families. Chris Sherwood, CEO of the NSPCC, praised the decision to scrap the limit, stating it will uplift hundreds of thousands of children out of poverty. He emphasized the importance of addressing child poverty comprehensively to ensure all children have the opportunity to thrive.
Estimates from the Institute of Fiscal Studies (IFS) indicate that affected families could have received an average of £4,400 annually in benefits if the cap never existed. However, lifting the two-child benefit cap may come with a yearly cost of £3.6 billion, as per previous IFS evaluations. Notably, Universal Credit claimants receive additional payments depending on the birth dates of their children, with varying amounts until specific ages.
Furthermore, parents can continue to receive payments until their child reaches age 19 if the child is pursuing full-time education or approved training. The decision to eliminate the two-child benefit cap marks a significant policy change aimed at alleviating financial pressures on families and promoting child welfare.