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, impacting those on Universal Credit and Tax Credits.
Initially introduced by the Conservatives in April 2017, the two-child benefit cap has faced criticism for exacerbating child poverty. Reeves stated that the cap will be removed starting April 2026, emphasizing the need to protect vulnerable children rather than penalize them within the welfare system.
The Office for Budget Responsibility (OBR) estimates that the elimination of the two-child benefit cap will incur a cost of £3 billion by 2029/30. According to the Department for Work and Pensions (DWP), about 1,665,540 children were affected by this policy in April 2025.
Separate from the benefit cap, which sets a limit on total benefits, the two-child benefit cap has been a point of contention. Chris Sherwood, CEO of the NSPCC, praised the decision to scrap the limit, highlighting its potential to uplift hundreds of thousands of children from poverty.
The NSPCC emphasized the importance of a comprehensive child poverty strategy to address underlying causes and ensure every child has the opportunity to thrive. The Institute of Fiscal Studies (IFS) estimates that affected families could have received an average of £4,400 more in benefits annually without the cap.
While lifting the two-child benefit cap may cost £3.6 billion per year, current Universal Credit claimants receive additional monthly payments based on their child’s birth date. Parents can continue receiving payments until their child reaches 16 or 19 if in full-time education or approved training.