HMRC Scraps Two-Child Benefit Cap, Financial Boost for UK Families

Families across the UK will no longer face the two-child benefit cap after the government announces changes that will lift approximately 450,000 children out of poverty.

This policy shift means parents can finally stop “scraping the barrel every month” to afford essential bills and food.

The two-child limit has been scrapped, with changes taking effect from April 2026. This reform represents one of the most substantial changes to childcare funding in recent years.

Families currently struggling with the two-child benefit cap will gain crucial financial breathing room.

Child Benefit stands as one of the most important forms of family support in the UK. These changes will extend this vital assistance to all children in a family.

You can still claim Child Benefit for any child under 16, or under 20 if they continue in approved education or training.

The government’s decision to remove this limit completely shows a significant shift in approach to family support.

HMRC removes two-child benefit cap from April 2026

The Chancellor of the Exchequer has announced the complete abolition of the two-child benefit cap starting from April 2026, marking a significant shift in UK welfare policy.

This long-contested policy, introduced by the Conservative government in 2017, has reportedly been a major driver of child poverty across Britain.

What the policy change means for families

According to the independent spending watchdog removing the cap will benefit an estimated 560,000 families who will gain an average of £5,310 per year.

Parents can now claim the child element of Universal Credit for all children regardless of family size, with each additional child beyond the current limit qualifying for approximately £3,514 annually.

The government estimates that 2 million children will live in households that see an increase in income as a result of this change.

How the cap previously limited support

The cap severely restricted financial assistance to larger families by:

• Preventing parents from claiming Universal Credit or tax credits for third or subsequent children born after April 2017
• Affecting approximately 1.6 million children – roughly one in nine children in the UK
• Breaking the fundamental link between what children need and the support they receive

Research showed the policy disproportionately impacted larger families, those in unstable accommodation, single-parent households, and minority ethnic families.

While the overall poverty rate for children remained steady at around 30% since 2009, the rate for children in families with three or more kids rose significantly from 40% in 2017 to 44% last year.

Why the government decided to scrap it

The Chancellor stated the two-child limit “pushes kids into poverty more than any other” policy and had “made almost no difference to the size of families” – contradicting its original purpose.

The government acknowledged that the cap fundamentally broke a core tenet of the welfare state by arbitrarily denying support based on birth order rather than need.

Official estimates show that scrapping the two-child benefit cap will reduce the number of children living in relative poverty by 450,000 by 2029/30.

The policy change represents a key measure in the government’s broader agenda to tackle child poverty and ensure all children have “the Best Start in Life”.

Families gain up to £1,000 more in Universal Credit

Universal Credit recipients will see substantial financial improvements after the lifting of the two-child benefit cap.

The Department for Work and Pensions reports that almost two million of the lowest income working households will receive a cash boost worth approximately £1,000 on average.

How the child element of Universal Credit works

The Universal Credit child element currently provides £292.81 monthly per child. First or only children born before 6 April 2017 qualify for a higher amount of £339 monthly.

Families could previously claim this element for their first two children only, unless specific exceptions applied.

Parents continue receiving these amounts until 31 August after their child’s 16th birthday or until age 19 if they remain in approved education.

Examples of new entitlements for third and fourth children

Families can expect significant financial improvements after the cap removal:

• Those affected by the current limit will see an average increase of £5,310 annually
• Each additional child beyond the current two-child limit qualifies for roughly £3,514 yearly
• Third and subsequent children born after 6 April 2017 will receive monthly payments of £292.81

A couple with four children where only two currently qualify for support could receive over £585 extra monthly. This change will impact approximately 560,000 families nationwide.

Impact on families with disabled children

Families with disabled children will see particular benefits from this policy shift. They can already claim disabled child additions regardless of birth order or the two-child limit.

Two payment rates exist:

• Lower rate: £158.76 monthly for children receiving any rate of Disability Living Allowance or Personal Independence Payment
• Higher rate: £495.87 monthly for children who are blind, receive the highest rate of DLA care component, or the enhanced daily living rate of PIP

Parents of disabled children typically face higher costs including specialist aids, additional clothing, increased travel expenses, and significantly higher childcare costs.

The removal of the two-child benefit cap will help these families access both standard child elements and disability additions for all their children.

Who qualifies for the new payments and how to claim

The two-child benefit cap removal takes effect April 2026. Families need clear guidance on eligibility and claiming processes.

Eligibility criteria for Universal Credit child element

The child element applies to children who normally live with you. You receive this payment until 31 August following your child’s 16th birthday, or until they turn 19 if they remain in eligible education or training.

Eligible education covers full-time non-advanced courses like GCSEs, A-levels, BTECs, Scottish Highers, SVQs or NVQs up to level 3.

Disabled children may qualify for additional support through:

• Lower rate: £158.76 monthly for children receiving Disability Living Allowance
• Higher rate: £495.87 monthly for children who are blind or receive higher-rate disability benefits

Do you need to update your claim?

Report changes to your circumstances immediately through your Universal Credit online account. Key changes include:

• Having a new child
• Changes to your child’s education
• Child leaving home
• Child turning 16 or 19

Prompt reporting prevents overpayments that require repayment.

What happens if you’re already receiving benefits

Current benefit recipients will receive new payments automatically from April 2026. However, exceptional circumstances may qualify you for exemptions now, such as multiple births, adoption, or non-parental caring arrangements.

How to apply for additional support

Childcare cost support covers up to 85% of expenses if you’re working.

Maximum monthly amounts reach £1,031.88 for one child and £1,768.94 for two or more children. Childcare must come from registered providers.

Contact DWP by phone or through your Universal Credit account to apply for current two-child limit exceptions.

Supporting documentation such as birth certificates or completed forms will typically be required depending on your circumstances.

Budget 2025 reforms extend support beyond the two-child cap

The removal of the two-child benefit cap forms part of wider Budget 2025 welfare reforms designed to reduce child poverty and address broader economic challenges.

Additional welfare changes in the Budget

Working-age benefits will increase by 3.8% to match September’s inflation rate, while the Universal Credit standard allowance will rise by 6% from April 2026.

The national living wage will grow to £12.71 per hour.

National minimum wage (NMW) will go up for 18 to 20-year-olds by 8.5% to £10.85 per hour and for 16 to 17-year-olds and apprentices by 6.0% to £8.00 per hour.

Families with multiple children in childcare will receive an extra £736.06 monthly per additional child beyond two.

The Budget sets aside £500 million to establish up to 1,000 Best Start Family Hubs across every local authority by April 2026.

These hubs will offer centralised support for parents, covering everything from breastfeeding guidance to housing assistance.

Interaction with existing benefit caps and childcare support

The two-child limit removal works separately from the overall benefit cap, which still affects some households.

One in ten families currently restricted by the two-child limit might not receive full benefits due to this interaction.

Child Benefit itself remains unchanged—families where the highest-earning parent earns below £80,000 can still claim this support.

The childcare element of Universal Credit expands significantly for larger families.

Key Takeaways

The UK government’s decision to scrap the two-child benefit cap from April 2026 marks a transformational shift in family support policy, delivering substantial financial relief to struggling households across Britain.

• Annual boost for families: Estimated 560,000 families will gain an average of £5,310 yearly, with each additional child beyond the current limit qualifying for approximately £3,514 in Universal Credit support.
• 450,000 children lifted from poverty: The policy change will reduce child poverty by removing arbitrary restrictions that previously denied support based on birth order rather than genuine need.
• Automatic payments from April 2026: Existing Universal Credit recipients won’t need to update their claims – additional payments for third and subsequent children will apply automatically when the cap is removed.
• Disabled children receive enhanced support: Families with disabled children can claim both standard child elements and disability additions (up to £495.87 monthly) for all children, addressing their significantly higher care costs.

This reform is an effort to restore the fundamental principle that welfare support should be based on children’s needs rather than family size. Providing crucial financial breathing room for essential bills, quality food, and childcare costs that many families have struggled to afford.

FAQs

Q1. When will the two-child benefit cap be removed? The two-child benefit cap will be scrapped from April 2026, allowing families to claim benefits for all their children regardless of family size.

Q2. How much extra money will families receive after the cap is removed? Families affected by the current limit will gain an average of £5,310 per year, with each additional child beyond the current two-child limit qualifying for approximately £3,514 annually.

Q3. Will I need to update my Universal Credit claim to receive the additional payments? No, if you’re already receiving Universal Credit, the new payments will automatically apply from April 2026 when the cap is removed.

Q4. How does this change affect families with disabled children? Families with disabled children will be able to claim both standard child elements and disability additions for all their children, regardless of birth order, providing enhanced support for their higher care costs.

Q5. What impact will removing the two-child benefit cap have on child poverty? The government estimates that scrapping the two-child benefit cap will reduce the number of children living in relative poverty by 450,000 by 2029/30, significantly improving the financial situation for many families.

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