Benefits and pensions rise as two-child cap ends
As the new financial year kicks off, several benefits and the state pension are set to increase, with larger families on universal credit receiving higher support. The removal of the two-child benefit cap has led to an average annual boost of £4,100 for around 480,000 households with three or more children. This change has been hailed as a significant shift by charities, while some critics argue the funds could be allocated more effectively elsewhere.
Policy shift impacts families with multiple children
The two-child benefit cap, which limited payments for families with more than two children for nine years, is no longer in effect. This policy was said to save the government approximately £3.6bn annually. Now, families with three or more children will see increased support through universal credit. Tracey Morris, a mother of five from Huddersfield, shares her experience: “I’ve always had to be careful with my spending. The cost of living got so high, it’s a struggle.”
“I’m exhausted worrying about money all the time. As a mum, sometimes you feel like you’re failing, but I’m not failing—it’s just the situation we’re in.”
Tracey, who works full-time for the local council and takes on extra shifts at a pub, relies on a food pantry called The Bread and Butter Thing for essential groceries. The policy change means she will gain nearly £300 monthly for each of her three children. The child element of universal credit will automatically adjust in May, requiring no additional application from eligible parents.
Broader benefits and tax adjustments
Other universal credit adjustments include a basic allowance increase, providing about £120 on average to three million households. However, the health component, which supports claimants with disabilities, is being cut in half. This reduction affects only new applicants, while existing recipients remain unchanged.
Disability-related benefits such as personal independence payment, attendance allowance, and disability living allowance, along with carer’s allowance, have all risen by 3.8% to match inflation. The state pension, meanwhile, increases by 4.8%, aligning with average wages. This is due to the triple-lock mechanism, which ensures the pension keeps pace with both prices and earnings.
The state pension age is also gradually rising, from 66 to 67 over the next two years. Alongside these changes, adjustments to inheritance tax on farms, dividend taxes, and venture capital trusts come into effect. Additionally, income tax thresholds remain frozen through 2031, as initially set by the Conservatives and later extended by Labour in November. This measure is often criticized as a “stealth tax” for generating revenue without raising rates.
Calculating personal impact
The BBC has launched a tool to help individuals estimate how their income might be affected. The calculator applies to employees in England, Wales, and Northern Ireland, though Scotland’s tax bands and self-employed workers’ calculations differ.
