Chancellor to replace carer benefit cliff-edge with gradual taper

Chancellor John Healey will abolish the carer's allowance cliff-edge rule during his budget announcement on Wednesday. The move replaces a binary penalty with a digital taper system that gradually reduces payments as earnings rise.

Under the current system, an unpaid carer who earns more than the weekly limit of £204 loses their entire allowance of £86.45 for that week. If a carer exceeded the limit by a single penny for a full year, the accumulated overpayment would reach £4,495.40, despite the total excess earnings being only 52p.

The new mechanism ensures that for every additional pound earned above the limit, the carer loses only one pound of their allowance. This change prevents carers from becoming financially worse off when they accept extra shifts or receive pay rises.

The Department for Work and Pensions previously maintained that carers were responsible for reporting changes in their earnings. Officials did not warn individuals when they breached the threshold, leading to unexpected liabilities. These debts often accumulated over several years before being identified.

An independent review commissioned by the government and led by disability rights expert Liz Sayce found that approximately 180,000 carers accrued overpayment debts totaling £300 million between 2019 and 2025. The review cited systemic administrative failures and the outdated design of the benefit as primary causes.

In one case detailed in the report, a carer was penalized after the national minimum wage rose faster than the earnings limit. She was 15p over the weekly threshold without changing her hours. Months later, she received a demand for £2,000 in repayments for total excess earnings of just £5.

Healey described the new approach as a way to give carers the freedom to work more without suddenly losing all their support. He stated that the previous system meant doing an extra shift could leave someone worse off.

The announcement is part of a series of measures the Chancellor has labeled as everyday fixes. Other changes include making higher tax-free mileage rates permanent and raising the minimum wage by about 4 percent to approximately £13.20 an hour.

Treasury insiders indicated that the budget will remain focused on immediate adjustments due to fiscal constraints caused by global events, including the conflict in Iran. Larger tax and spending decisions are expected to be deferred until the spending review next year.

The new digital taper system will not be fully implemented before the end of the decade due to technical requirements. Carers UK noted that the cliff-edge rule often discouraged carers from working part-time or accepting promotions, while the Carers Trust called the change a long-overdue reform.