Benefits and pensions rise as two-child cap ends
Benefits and pensions rise as two-child cap ends
With the new financial year underway, several benefits and the state pension have seen increases, including enhanced support for families with more than two children under the universal credit system. The two-child cap has been removed, providing an average annual boost of £4,100 to around 480,000 households with three or more children.
Financial relief for larger families
Families with multiple children, like Tracey Morris from Huddersfield, are among those benefiting from the change. As a single mother of five, she works full-time for the local council and takes on extra shifts at a pub to supplement her income. The cap’s removal eases the burden of managing rising living costs, which she describes as a constant struggle.
“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.”
Universal credit adjustments
Starting in May, the child component of universal credit will automatically increase, offering monthly additions of nearly £300 per child to eligible parents. Alongside this, the basic allowance will rise by £120 on average for about three million families. However, the health element—dedicated to claimants with disabilities—will be cut in half, affecting new applicants while safeguarding existing recipients.
Broader benefit and tax changes
Other major benefits, such as personal independence payment, attendance allowance, disability living allowance, and carer’s allowance, have all risen by 3.8%, aligning with inflation. The state pension, too, has increased by 4.8%, reflecting the triple-lock mechanism that ties raises to average wages. This adjustment also marks a gradual shift in the state pension age, moving from 66 to 67 over the next two years.
Tax threshold freeze and implications
Additional changes include the freezing of income tax thresholds for another year, pushing more individuals into higher tax brackets as wages grow. The Conservatives initially set this freeze until 2028-29, later extended by Labour to 2031. While this generates extra revenue for public services, economists call it a “stealth tax” due to its indirect impact on taxpayers.
Other adjustments, such as revised inheritance tax rules for farms, dividend tax rates, and new tax relief for homeworkers, also take effect. These changes highlight the government’s ongoing efforts to adapt benefit and tax policies to current economic conditions.
The BBC has developed a tool to help users calculate how their earnings might be affected by these updates. This calculator applies to employees in England, Wales, and Northern Ireland, though Scotland maintains separate tax bands, and self-employed workers face distinct rules.
