Rachel Reeves 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.
Originally introduced 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.”
According to the Office for Budget Responsibility (OBR), the removal of the two-child benefit cap is projected to cost £3 billion by 2029/30. In April 2025, around 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 limit on total benefit amounts, the two-child benefit cap has been a point of contention. Chris Sherwood, CEO of the NSPCC, praised the decision to scrap the limit, stating that it will help lift hundreds of thousands of children out of poverty.
The Institute of Fiscal Studies (IFS) estimates that affected families could have received an average of £4,400 annually in benefits if the cap had never been implemented. However, lifting the two-child benefit cap is anticipated to cost around £3.6 billion yearly, with Universal Credit claimants receiving extra payments depending on the child’s birth date.
Parents can continue receiving payments until their child reaches 19 if they remain in full-time education or approved training. This move is seen as a step towards creating a poverty-free environment for children, with calls for a comprehensive child poverty strategy to address underlying causes and ensure every child has the opportunity to flourish.