Rachel Reeves has announced during the Autumn Budget that she will eliminate the contentious two-child benefit cap. This policy restricts low-income families from receiving additional means-tested benefits when they have 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 advocates, who argue that limiting benefits is driving numerous children into poverty. The scrapping of this cap is scheduled to take effect from April 2026, with the Chancellor emphasizing a compassionate approach towards vulnerable children in the welfare system.
According to the Office for Budget Responsibility (OBR), the removal of the two-child benefit cap is estimated 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 policy.
Separate from the benefit cap, which sets a maximum limit on total benefits, the two-child benefit cap has drawn attention for its impact on families. Chris Sherwood, CEO of the NSPCC, welcomed the decision to scrap the cap, highlighting the positive impact it will have on lifting children out of poverty.
The Institute of Fiscal Studies (IFS) projects 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 could lead to an annual cost of £3.6 billion, as per previous IFS estimates. Universal Credit claimants currently receive varying extra amounts based on the birth date of their children.
Parents can receive these additional payments until their child turns 16 or, if in full-time education or approved training, up to the age of 19. The move to abolish the two-child benefit cap has been lauded as a step towards ensuring poverty-free childhoods for all children, with calls for a comprehensive strategy to address the root causes of child poverty.