Rachel Reeves announced during the Autumn Budget that she will eliminate the contentious two-child benefit cap. This cap restricts low-income families from receiving additional means-tested benefits for a third or subsequent child born after April 6, 2017, impacting those on Universal Credit and Tax Credits.
Initially implemented by the Conservatives in April 2017, the policy has faced criticism for exacerbating child poverty. The cap is set to be removed starting April 2026, with the Chancellor emphasizing the government’s stance against penalizing vulnerable children within the welfare system.
The Office for Budget Responsibility estimates that abolishing the two-child benefit cap will incur a cost of £3 billion by 2029/30. In April 2025, approximately 1,665,540 children were affected by this cap, according to the Department for Work and Pensions (DWP).
Separate from the benefit cap, which limits total benefit amounts, the two-child benefit cap has been a focal point of advocacy efforts due to its adverse impact on children in poverty. CEO of the NSPCC, Chris Sherwood, hailed the removal of the cap as a positive step towards lifting hundreds of thousands of children out of poverty, stressing the importance of addressing underlying causes of child poverty comprehensively.
According to the Institute of Fiscal Studies (IFS), families affected by the cap could have received an average of £4,400 more in benefits annually. Despite potential costs, lifting the cap is seen as crucial for supporting families in need. Universal Credit claimants can expect increased monthly allowances depending on the birth dates of their children, with payments extending until the child turns 16 or, in certain cases, 19 if pursuing full-time education or approved training.