Rachel Reeves has announced during the Autumn Budget that she will eliminate the contentious two-child benefit cap. This cap prevents 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.
Initially introduced by the Conservatives in April 2017, the policy has faced criticism from advocates who argue that limiting benefits is driving many children into poverty. The cap is set to be removed in April 2026, with the Chancellor stating in the Commons that penalizing the most vulnerable children is not the solution to a flawed 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, the Department for Work and Pensions (DWP) reported that 1,665,540 children were affected by this cap, which is distinct from the benefit cap that sets a limit on total benefit amounts.
Chris Sherwood, CEO of the NSPCC, welcomed the decision to scrap the two-child limit, emphasizing the positive impact it will have on lifting hundreds of thousands of children out of poverty. He stressed the importance of addressing the underlying causes of child poverty through a comprehensive strategy to ensure all children have the opportunity to thrive.
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. The IFS also suggests that lifting the two-child benefit cap could incur an annual cost of £3.6 billion, with Universal Credit claimants currently receiving additional monthly payments depending on the birth date of their children.
Payments continue until the child reaches 16 or, if in full-time education or approved training, up to age 19. The Government’s decision to abolish the two-child benefit cap represents a significant policy change aimed at addressing child poverty and supporting vulnerable families.