Budget 2025: Two-child benefit cap scrapped – here’s what that will mean for parents
Rachel Reeves has announced the end to the two-child benefit cap in today’s Budget, following months of intense pressure from backbenchers, campaign groups and political opponents.
The Office for Budget Responsibility’s (OBR) financial outlook calculated that the move would increase benefits for 560,000 families by an average of £5,310.
Coming into force from April 2026, the government estimates that this change will reduce the number of children living in poverty by 450,000 by 2029/30.
According to the OBR, it will cost the Exchequer £3bn by now.
This will be partly offset by reforms that would see a £1.1bn increase in gambling tax, reflecting Gordon Brown’s recommendation in preparation for the fiscal event.
Writing in the New Statesman after the announcement, the former Labor prime minister said: “With a brief Budget intervention this afternoon, Chancellor Rachel Reeves has done more to transform the lives of 450,000 of Britain’s poorest children than seven previous Conservative chancellors who did nothing but harm the lives of vulnerable children for 14 long years.”
“It is time for all parties to realize that the future of the country depends on investing in the potential of all our children, not just some of them,” he added.
The decision will come as a relief to child poverty campaigners, who have been urging the chancellor to scrap the policy altogether rather than amend it.
It marks a major U-turn for Labor, with ministers previously refusing to listen to criticism of the measure. Last year the prime minister imposed a whip on seven Labor MPs who voted against their party to oppose the two-child allowance limit.
Here’s everything you need to know about politics and what scrap will mean for families:
What is the two-child limit for benefits?
The two-child benefit cap prevents parents from claiming universal credit or tax credit for their third child. It was introduced by the Conservatives and came into force in April 2017. Only valid for children born after April 6, 2017.
The measure was announced by then-Chancellor George Osborne, alongside a number of other changes to the benefits system. The Conservatives said the measures were designed to encourage welfare recipients “to make the same choices as those who support themselves solely by working”.
Latest official figures show 1.6 million children live in families affected by the policy. Campaigners, charities and politicians from across the spectrum have called on the government to scrap the measure.
This is a separate policy on the benefit cap, which was also introduced under the then Conservative and Liberal Democrat coalition government, under which the amount of benefit a household receives will be reduced to ensure that beneficiaries do not receive more than the limit.
What is the impact of two child titles?
Organizations working in the sector claim that 109 children across the UK are driven into poverty every day due to this policy.
The number of children living in poor households has been increasing steadily over the past decade; 4.5 million children (about one-third) currently live in poverty.
Poverty can be defined in a variety of ways, but the Department for Work and Pensions (DWP) uses “relative low income” as an indicator, referring to people in households earning below 60 per cent of the median income of £36,700 or £22,020 in 2024.
Some of these children are deprived of basic needs such as food, warmth, clothing or basic toiletries, according to the Joseph Rowntree Foundation.
How did parents and campaigners react?
Alison Garnham, Chief Executive of Child Poverty Action Group, said: “Removing the two-child limit will be transformational for children. It is a much-needed fresh start in our country’s efforts to eradicate child poverty and, while there is so much more to do, it gives us strong foundations on which to build. Every child deserves the best start in life and with today’s decision the government has done the right thing.”
Shauna and her husband have three children. He works full time. She says: “This will make a big difference because we’ve had to go into debt. Hopefully this will mean I can pay the last bills that come in every month instead of going into trouble. I’ll be able to buy new beds for my two children. They can feel the springs in the beds they’ve had for years.”
Jo has four children. She says the extra money will help cover childcare costs and allow her to work extra work shifts. He said: “Support for each of my children also means they can have better quality food, not always the cheapest. We live from bread to bread.”
Responding to today’s announcement, Save the Children UK CEO Moazzam Malik said: “We welcome the Chancellor’s bold action to remove the two-child limit. By the end of this Parliament, 450,000 children across the country will have been lifted out of poverty. Scrapping this unfair policy is the strongest step to reduce child poverty in a generation.”
Sophie Livingstone MBE, chief executive of Little Village, said: “Removing the draconian two-child limit is long overdue and a strong win for parents and campaigners who have fought hard for change.
“Ultimately it will ease the pressure on many struggling families, but we cannot forget the parents and children who have endured this policy for the last decade and all the work we still need to do if we are to end child poverty.”
Mother-of-three Thea Jaffe, who is supported by the charity, said: “This money will help me pay my bills and essentials, but what I’m most excited about is finally spending a weekend playing with my children rather than budgeting and worrying. But let’s be clear, it’s going to be another six months until April to sort out winter boots, coats, childcare, higher energy bills – not to mention Christmas!”
