Debate Over Two-Child Cap on Universal Credit and Tax Credits
The two-child cap limits universal credit and tax credits to the first two children, meaning any third or subsequent children born after 6 April 2017 do not result in additional benefits.
Approximately 1.6 million children live in families affected by this cap. Without the limit, these families could have about £4,400 more annually in entitlements, roughly 10% of their disposable income.
The policy specifically targets universal credit and tax credits, not child benefit.
There are exceptions allowing claims for all children in certain cases, such as multiple births after the first child, births following rape or coercive relationships, adopted or in-care children, or a child of the claimant’s child.
More than 100 charities and some Labour MPs have called for scrapping the cap, while Conservatives defend it, arguing it makes the system fairer and produces savings for the Treasury.
Chancellor Rachel Reeves has indicated potential changes to the policy, noting it is not right that bigger families are penalised. Options under consideration include maintaining the cap but reducing payment levels, applying partial payments that decrease with each extra child, or raising the cap to a higher number of children.
Any changes are likely to reshape how benefits are distributed rather than fully abolishing the cap and would require offsetting savings through cuts elsewhere, tax increases, or additional borrowing.
