Rachel Reeves announced in her Autumn Budget that she will eliminate the divisive two-child benefit cap. This policy, implemented by the Conservatives in April 2017, restricts low-income families from receiving further means-tested benefits when they have a third or subsequent child born after April 6, 2017, affecting those on Universal Credit and Tax Credits.
Following years of criticism from advocates who argue that the cap exacerbates child poverty, it will be abolished starting April 2026. The Chancellor emphasized, “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 incur a cost of £3 billion by 2029/30. In April 2025, a total of 1,665,540 children were impacted by this cap, as reported by the Department for Work and Pensions (DWP).
Separate from the benefit cap, which limits total benefit amounts, the two-child benefit cap has been a contentious issue. Chris Sherwood, CEO of the NSPCC, welcomed the decision to scrap the limit, stating that it will uplift 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 more in benefits annually if the cap had never been enforced. Additionally, lifting the two-child benefit cap could potentially cost £3.6 billion yearly, as per previous IFS calculations.
Under the revised system, Universal Credit claimants with a first child born before April 6, 2017, receive an extra £339 per month, while those with a child born on or after that date or a second child receive £292.81 additionally, until the child reaches 16 years old. Parents can continue to receive payments until their child turns 19 if they are pursuing full-time education or approved training.