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 for 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 policy has faced criticism for exacerbating child poverty. The cap is set to be abolished starting from April 2026, with the Chancellor emphasizing the government’s stance against penalizing 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 limits the total benefit amount, the two-child benefit cap has drawn reactions from various organizations. Chris Sherwood, CEO of the NSPCC, commended the decision to scrap the limit, highlighting its potential to lift hundreds of thousands of children out of poverty.
The Institute of Fiscal Studies (IFS) estimates that impacted families could have received an average of £4,400 annually in benefits if the cap had never been enforced. Additionally, lifting the two-child benefit cap could potentially result in a yearly cost of £3.6 billion, with Universal Credit claimants receiving varying extra payments depending on their child’s birth date.
Payments for the first and second child are set at different amounts, with additional support extended until the child reaches 16 or, in certain cases, 19 if they are pursuing full-time education or approved training. To enhance the impact of the Budget’s measures, further actions are suggested to address the underlying causes of child poverty and ensure every child has the opportunity to thrive.
