Rachel Reeves has announced during the Autumn Budget that she will eliminate the contentious two-child benefit cap. This cap prevents low-income families from receiving additional 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 implemented by the Conservatives in April 2017, the policy has faced criticism from activists who argue that limiting benefits is driving many children into poverty. The cap is set to be removed starting April 2026, with the Chancellor stating, “We do not believe in punishing the most vulnerable children to fix a broken welfare system.”
The Office for Budget Responsibility estimates that removing 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 imposes a ceiling on the total benefit amount, the two-child benefit cap has drawn significant attention. Chris Sherwood, CEO of the NSPCC, welcomed the decision to scrap the limit, emphasizing its potential to lift hundreds of thousands of children out of poverty.
Sherwood highlighted the struggles faced by children and young individuals, such as the inability to afford basic necessities and concerns about societal judgment, underscoring the importance of addressing the root causes of child poverty comprehensively.
According to the Institute of Fiscal Studies (IFS), families impacted by the cap could have received an average of £4,400 annually in benefits if the cap had never been in place. However, projections indicate that lifting the cap could lead to an annual cost of £3.6 billion, with Universal Credit claimants receiving additional monthly amounts depending on their child’s birth date.
Payments for the first and second child vary, with the extra amount provided until the child reaches 16 years old. Parents can receive payments until their child turns 19 if they are engaged in full-time education or approved training.