Chancellor Rachel Reeves has indicated the controversial two-child benefit cap could be abolished in the upcoming 2025 Budget, signalling potential financial relief for families with three or more children across the UK.
What is the two-child benefit cap?
Introduced by the Conservative government in 2017, the policy currently restricts child tax credit and Universal Credit payments to the first two children in most households. This means parents receive no additional state support for third or subsequent children through these benefits.
Speaking recently to BBC 5Live, Chancellor Reeves argued that children should not face penalties simply for being part of larger families. She highlighted how unexpected life circumstances such as serious illness, bereavement, or adoption can leave parents struggling financially under the current system.
Potential impact on family finances and child poverty
Scrapping the cap could deliver meaningful financial support to households already grappling with rising living costs, childcare expenses, and everyday essentials. Families who previously saw their third or fourth child excluded from benefit calculations may experience increased monthly payments, providing crucial assistance with bills, food, and other necessities.
According to the Child Poverty Action Group, the existing cap is estimated to push approximately 109 children into poverty every single day across the United Kingdom. Removing this restriction could significantly reduce reliance on emergency support services and short-term borrowing, offering greater financial stability to affected households.
The potential policy change has gained significant backing within the Labour Party, including from former Prime Minister Gordon Brown. Brown told Sky News he felt confident the rule would be addressed in the Budget scheduled for November 26, 2025.
Funding the potential policy change
Eliminating the two-child benefit cap would represent a major shift in UK welfare policy, potentially reshaping how families plan their finances and access state support. However, the government faces the challenge of funding this change.
Potential funding mechanisms could include increased taxes for top earners or adjustments to National Insurance contributions. Chancellor Reeves has acknowledged the broader economic balancing act facing her this month, emphasising the need to manage costs carefully while addressing the urgent issue of child poverty.
The final decision will be revealed when the Chancellor presents the full Budget to Parliament later this month, determining whether thousands of larger families will receive enhanced financial support from the state.
