Benefits and pensions rise as two-child cap ends
Benefits and pensions rise as two-child cap ends
With the new financial year underway, a range of welfare payments and state pensions are seeing increases, including additional support for families with more than two children under the universal credit system. The policy of limiting benefits to the first two children has been removed, resulting in an average annual boost of £4,100 for approximately 480,000 households with three or more children.
Impact on large families
The change is hailed as a significant relief for many, particularly as living costs continue to climb. One single mother, Tracey Morris, from Huddersfield, shared her experience with the BBC. She is raising five children, two of whom were born after the cap was introduced. “I’ve always had to be careful with every penny I spend,” she explained. “The cost of living got so high, it’s a struggle.”
“It’s a massive help in managing the rising expenses,” said Tracey, who works full-time for her local council and takes on extra shifts at a pub to supplement her income. She relies on the local food pantry, The Bread and Butter Thing, to afford essentials. “I’m exhausted worrying about money all the time. As a mum, sometimes you feel like you’re failing, but it’s just the situation we’re in.”
Universal credit adjustments
Starting in May, the child component of universal credit will automatically increase, benefiting those with multiple children. Concurrently, the basic allowance for universal credit recipients will rise by about £120 on average, affecting roughly three million families. However, the health element—intended for claimants with disabilities—will be reduced by half. This cut applies only to new applicants, while existing recipients remain unaffected.
Broader benefit and pension changes
Other welfare schemes, such as primary disability benefits (personal independence payment, attendance allowance, and disability living allowance), as well as carer’s allowance, have also risen by 3.8%, aligning with inflation. The state pension, meanwhile, is increasing by 4.8%, tied to the triple-lock mechanism. This ensures pensions keep pace with average wages and inflation, though the retirement age will gradually rise from 66 to 67 over the next two years.
Tax adjustments and broader reforms
Additional changes take effect this year, including modifications to inheritance tax on farms, dividend taxes, and tax relief for venture capital trusts and homeworking. Income tax thresholds have remained frozen, meaning more individuals may enter higher tax brackets as wages grow. The Conservatives initially set this freeze until 2028-29, and Labour later extended it to 2031. While this generates extra funds for public services, critics label it a “stealth tax” due to its indirect nature.
The BBC has developed a calculator to assess how these adjustments might affect your income. It applies to employees in England, Wales, and Northern Ireland, though Scotland and self-employed workers follow different tax rules.
