Benefits and pensions rise as two-child cap ends
Benefits and Pensions Increase with Two-Child Cap Removal
As the new financial year begins, a range of benefits and the state pension are set to rise, offering additional support to families with more children. The decision to abolish the two-child benefit cap has brought relief to approximately 480,000 households with three or more children, granting them an average annual increase of £4,100. This change has been celebrated by some as a significant shift in policy, while others question its effectiveness in addressing broader financial challenges.
Impact on Larger Families
Tracey Morris, a single mother in Huddersfield with five children, is among those benefiting from the policy change. Her youngest two were born after the cap was implemented, limiting her ability to claim support for them. Now, she will receive nearly £300 extra monthly for each of her three children, easing the burden of rising living costs. “It’s a massive help,” she told the BBC, adding that the financial strain had left her feeling exhausted and questioning her ability to provide for her family.
“I’ve always had to be careful what I spend and how I spend it. The cost of living got so high, it’s a struggle,” Tracey said.
Other adjustments to universal credit include a 3.8% increase in the basic allowance, which will benefit around three million families with an average gain of £120 annually. However, the health element, designed for claimants with disabilities, is being cut by half, affecting new beneficiaries while protecting existing ones. Meanwhile, the state pension is rising by 4.8%, aligned with average wage growth, thanks to the triple-lock mechanism. This ensures that individuals with 35 qualifying years of contributions will see their pensions increase, though the retirement age will gradually rise from 66 to 67 over the next two years.
Broader Policy Shifts
Alongside these changes, adjustments to tax policies are also taking effect. Inheritance tax rules for farms, dividend taxes, and tax relief for venture capital trusts and homeworking have been updated. Additionally, income tax thresholds remain frozen, meaning more individuals are entering higher tax brackets as wages grow. This move, while generating extra revenue for public services, has drawn criticism from economists as a “stealth tax” due to its indirect impact on taxpayers.
The BBC has launched a tool to help people estimate how their earnings might be affected by these changes. The calculator applies to employees in England, Wales, and Northern Ireland, though Scotland’s tax bands and self-employed workers’ rates differ. Charities have hailed the removal of the two-child cap as a gamechanger, particularly for families struggling with the cost of living, but some argue the funds could be allocated more efficiently elsewhere.
