Benefits and pensions rise as two-child cap ends
Benefits and Pensions Rise as Two-Child Cap Ends
As the new financial year begins, a variety of social benefits and the state pension are seeing upward adjustments. This includes increased financial support for families with more than two children under the universal credit system. The removal of the two-child benefit cap has allowed approximately 480,000 households with three or more children to receive an average annual boost of £4,100.
Relief for Larger Families
The policy change marks a significant shift, with critics noting that the government could allocate funds more effectively elsewhere. However, for many parents, this adjustment has been a welcome relief. Tracey Morris, a single mother in Huddersfield, has five children aged six to 19. The youngest two were born after the cap was implemented, leaving her with a new financial cushion.
“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. “It’s so draining. 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, unfortunately, that we are in.”
Tracey works full-time for the local council and occasionally takes on extra shifts at a pub to supplement her income. She relies on a local food pantry, The Bread and Butter Thing, to cover basic groceries. The child element of universal credit will see a monthly increase of nearly £300 per child starting in May, benefiting over three million families.
Other Benefit Adjustments
Alongside this, the basic allowance for universal credit has been raised, providing an average annual increase of £120 for recipients. However, the health element, which supports individuals with disabilities, is being cut in half. This affects new claimants while protecting the 2.8 million existing recipients.
Additional benefits, such as disability living allowance and personal independence payment, have also increased by 3.8%, aligning with inflation. The state pension, meanwhile, is set to rise by 4.8%, matching average wages due to the triple-lock mechanism. This change also impacts the pension age, which will gradually increase from 66 to 67 over the next two years.
Tax Changes and Broader Impacts
Other legislative updates include reforms to inheritance tax on farms, dividend tax rates, and venture capital trust relief. Homeworking tax relief is also now available. Notably, income tax thresholds remain frozen, pushing more people into higher tax brackets as wages grow. The Conservatives initially paused threshold increases until 2028-29, later extended by Labour to 2031.
These adjustments generate extra revenue for public services, though economists often refer to them as a “stealth tax” since they raise funds without altering tax rates. The BBC has developed a tool to calculate how these changes might affect employees in England, Wales, and Northern Ireland. Scotland’s tax bands differ, and self-employed individuals are taxed under a separate framework.
