Benefits and pensions rise as two-child cap ends
Benefits and Pensions Adjusted as Two-Child Cap Phased Out
With the new financial year underway, several key benefits and the state pension are experiencing increases. This includes enhanced support for families with more than two children through the universal credit system. The removal of the two-child benefit cap has resulted in an average annual boost of £4,100 for around 480,000 households with three or more children. Charities have hailed the decision as a significant shift, while some critics argue the funds might be better allocated elsewhere.
A Mother’s Perspective on the Change
Tracey Morris, a single mother from Huddersfield, is among those benefiting from the adjustment. She has five children, with the youngest two born after the policy change. Working full-time for the local council and occasionally taking on pub shifts, she relies on the Bread and Butter Thing food pantry to cover essentials. “The cost of living has been so high, it’s a struggle,” she said, describing the financial pressure as “draining” and “exhausting.” Despite the challenges, she emphasized that her efforts are not in vain, calling the situation a “hardship” rather than a personal failure.
“I’ve always had to be careful what I spend and how I spend it. As a mum, sometimes you feel like you’re failing, but it’s just the situation, unfortunately, that we are in.”
Universal Credit Adjustments
Starting in May, the child component of universal credit will automatically rise, providing additional support to eligible parents without requiring new applications. Simultaneously, the basic allowance for universal credit beneficiaries is increasing, with approximately three million families anticipating an average gain of £120. However, the health element of the benefit, which supports those with disabilities, is being cut in half. This change will only impact new claimants, while 2.8 million existing recipients remain unaffected.
Broader Benefit and Tax Reforms
Other benefits, such as personal independence payment, attendance allowance, and carer’s allowance, have also increased by 3.8%, aligning with inflation. The state pension is rising by 4.8%, matching average wages, thanks to the triple-lock mechanism. This ensures pensioners receive a fair share of the rising cost of living. Beyond this, new tax measures are coming into effect, including adjustments to inheritance tax on farms, dividend rates, venture capital trust relief, and homeworking allowances.
Tax Thresholds and Economic Implications
Income tax thresholds have remained unchanged for the past year, meaning more individuals are entering higher tax brackets or starting to pay taxes as wages climb. The Conservatives initially set this freeze until 2028-29, and Labour later extended it to 2031. While this generates extra revenue for public services, economists refer to it as a “stealth tax,” as it raises funds without altering tax rates. The BBC has developed a tool to calculate how these changes might affect earnings in England, Wales, and Northern Ireland, though Scotland’s tax bands differ for self-employed workers.