Rachel Reeves has announced in her Autumn Budget that she will eliminate the contentious two-child benefit cap. This policy currently prevents low-income families from receiving additional means-tested benefits for a third or subsequent child born after April 6, 2017, affecting those on Universal Credit and Tax Credits.
Initially introduced by the Conservatives in April 2017, the two-child benefit cap has faced criticism from activists who argue that limiting benefits is driving many children into poverty. The Chancellor has revealed that the cap will be removed starting April 2026, emphasizing a belief that penalizing vulnerable children is not the answer to fixing a flawed welfare system.
According to the Office for Budget Responsibility (OBR), the elimination of the two-child benefit cap is projected to incur a cost of £3 billion by 2029/30. In April 2025, the Department for Work and Pensions (DWP) reported that 1,665,540 children were impacted by this cap.
Separate from the benefit cap, which sets a maximum limit on total benefits, the two-child benefit cap has been a point of contention. Chris Sherwood, CEO of the NSPCC, hailed the decision to scrap the limit, stating that it would help lift hundreds of thousands of children out of poverty. He emphasized the importance of addressing the root causes of child poverty through a comprehensive strategy.
Estimates from the Institute of Fiscal Studies (IFS) suggest that affected families could have received an average of £4,400 annually in benefits if the cap had never been implemented. The IFS also projects that the removal of the two-child benefit cap could result in a yearly cost of £3.6 billion. Currently, Universal Credit claimants receive additional monthly payments based on the birth dates of their children.
Parents can continue to receive these extra payments until their child turns 16 or 19 if they are in full-time education or approved training.