Rachel Reeves announced in 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 when they have a third or subsequent child born after April 6, 2017, impacting those on Universal Credit and Tax Credits.
Originally 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 Reeves stating, “We do not believe in punishing the most vulnerable children to fix a broken welfare system.”
The Office for Budget Responsibility estimates that ending the two-child benefit cap will incur a cost of £3 billion by 2029/30. As of April 2025, around 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 benefits received, the two-child benefit cap has been a contentious issue. Chris Sherwood, CEO of the NSPCC, praised the move to scrap the limit, emphasizing the positive impact on children living in poverty.
The Institute of Fiscal Studies suggests that affected families could have received an average of £4,400 more in benefits annually if the cap had never been introduced. However, lifting the cap could result in an estimated annual cost of £3.6 billion, with Universal Credit claimants potentially receiving extra payments based on the birthdate of their children.
Payments for additional children are scheduled until August 31 after the child turns 16, with extensions possible for children in full-time education or approved training until they reach 19. The move to eliminate the two-child benefit cap is seen as a step towards reducing child poverty, with calls for comprehensive strategies to address the root causes of poverty and ensure a better future for all children.