The UK Chancellor Rachel Reeves has announced the removal of the two-child benefit cap in this year’s budget. The removal is one of the big decisions taken by the government under the child poverty reduction strategy. Let’s see how this decision will impact the UK families on Universal Credit.
The two-child benefit cap was introduced in April 2017, and it restricts families from claiming the Universal Credit or tax credits for more than two children. The campaigners and MPs have favored the decision and have been demanding the end of the two-child benefit cap for a long time. The government has now planned to end the two-child benefit cap from April 2026.
This move will allow families to receive Universal Credit or tax credits for the third child and other children. The government plans to reduce the country’s child poverty rate in 5 years and help families give their children a better life.
Who will be affected by the Two-child benefit cap removal?
If you are wondering who will be affected by the two-child benefit cap removal, you can learn about it below:
- Families with three or more children claiming Universal Credit, and where at least one of the children was born after April 2017.
- According to reports, more than 1.6 million children were affected due to the two-child benefit cap, so the removal will affect all these children and help the families receive the benefit.
What does the Two-child Benefit cap removal mean for UK families on Universal Credit?
If you receive the Universal Credit with children element, here’s what the removal of the two-child benefit cap will mean for you:
- The families claiming Universal Credit for the first two children can now claim the credit for third or more children.
- Families can receive £3,500 a year for each third or more children, meaning the families can have additional credit if they have more children, such as £20,000 if they have eight children.
- The removal of the two-child benefit cap will not affect the credit amount, so your payout will be the same for each child, depending on their age.
How will the two-child benefit removal impact child poverty?
According to the government, the removal of the two-child benefit cap will reduce child poverty in larger families. Child poverty rate is higher in the West Midlands at 38.5%, whereas Nottingham and Birmingham wards also have a higher rate of child poverty. The report says the cap has contributed to the poverty rate for families with three or more children.
With the increasing rate of child poverty, the government uses the removal of the two-child benefit cap to tackle this issue. The government estimates that 450,000 children will be out of child poverty by 2030 due to the cap removal.
The government estimates that 2 million children will see an increase in their Universal Credit after the removal of the cap. The household with children with disability receives the additional credit under UC from the DWP; the removal will allow families to include more children.
How will the government fund Universal Credit with the removal of the two-child benefit Cap?
The UK government has been cutting the social welfare funds, but the removal of the two-child benefit cap will surely increase the budget, as families with more than two children will qualify for the Universal Credit.
According to the UK government, the two-child benefit cap removal and providing the children’s element to families for the third child will cost around £3 billion a year in five years. The government may introduce some new reforms and adjustments to cover the cost of the two-child benefit removal.
The government has already increased the taxes on businesses, where they estimate to gain tens of billions of revenue. The government has to look into many things to cover the cost, debt management, and others.
The government has finally taken the step to remove the cap and work to reduce child poverty in the country, and ensure children can have access to the best life. The restriction will be lifted from the Universal Credit from April 2026, so families with more than two children, be ready to receive the benefit regardless of their family size.
Disclaimer: Two-child benefit cap updates are for general awareness only; official changes depend on UK government policy.