Benefit Cap Limits Gains From Two-Child Policy Change

For thousands of low-income families across Britain, the long-awaited removal of the two-child limit on Universal Credit and Child Tax Credit—announced by Chancellor Rachel Reeves in the 2025 Labour Budget—was supposed to mark a historic turning point in the fight against child poverty. Yet, as the April 2026 implementation date draws near, new government analyses and expert commentary reveal a far more complicated picture, with tens of thousands of families set to see little or no financial improvement due to the ongoing freeze of the broader benefit cap.

According to the Department for Work and Pensions (DWP), the abolition of the two-child limit is projected to deliver an average annual boost of £5,310 to some 560,000 families, a move the government estimates will reduce the number of children living in poverty by 550,000 by 2030. The Office for Budget Responsibility (OBR) has echoed these projections, underlining the policy’s potential to lift a substantial number of children out of hardship in the coming years.

However, the DWP’s own impact assessment—first reported by The i newspaper and confirmed by multiple outlets—finds that around 50,000 low-income families will receive no financial benefit from the policy change. The reason? The existing benefit cap, a separate policy that limits the total amount of social security a household can receive, will continue to restrict payments to these households even after the two-child limit is lifted. An additional 10,000 to 20,000 families will see only a partial increase in their income, as their benefits will rise just to the cap’s threshold but not beyond.

The benefit cap itself remains a point of contention. Last raised in 2023, it currently stands at £1,835 per month—or £22,020 annually—for most families or claimants with children. Those living in Greater London face a higher cap of £2,110.25 per month, or £25,323 per year, reflecting the capital’s greater cost of living. Notably, the benefit cap does not apply to households earning at least £846 a month through paid work. Despite a statutory obligation to review the cap every five years, the next review is not due until November 2027, and the government has confirmed it will remain frozen for the 2026/27 fiscal year. This marks the fourth consecutive year without an inflation adjustment, a fact that has drawn criticism from anti-poverty campaigners and policy experts alike.

Deven Ghelani, founder of the think tank Policy in Practice, warned that the complexity of the UK’s benefits system “will limit the impacts on larger families and prevent some from a change that could otherwise provide much-needed financial relief.” He added, “Our analysis finds that one in ten children hit by the two-child limit won’t benefit from it being abolished, and a further one in ten will only benefit partially, unless the Chancellor lifts the benefit cap too.” Ghelani’s concerns about the “complex interaction” between the two-child limit and the benefit cap highlight the challenges facing policymakers as they seek to deliver support to the neediest families.

Child poverty experts have long linked rising rates of hardship in large families to the two-child limit, which was introduced by the Conservative-led coalition government in 2013. Its removal, therefore, has been welcomed by many campaigners as a “game-changing moment for children.” Dan Paskins, executive director of Save the Children UK, praised the government for recognizing that “children have paid the price of a poorly thought-out policy for far too long.” He called the change “momentous” and applauded the leadership shown by the Prime Minister and Chancellor.

Nevertheless, experts caution that the policy’s positive effects could be blunted unless the government addresses the broader issue of the benefit cap. Iain Porter, a senior policy adviser at the Joseph Rowntree Foundation, said, “It’s good news that the government has begun the process of reducing child poverty and the removal of the two-child limit for Universal Credit is undoubtedly a step in the right direction. But on its own it’s not enough.” Porter’s analysis suggests that while child poverty will fall sharply in April, the decline could soon stall, leaving millions of children at risk unless further action is taken. “By the end of the parliament there will still be around 4 million children in poverty—unless the government takes additional steps. An immediate and obvious step is to address the damage done by the benefit cap, which leaves families in hardship.”

Porter and the Joseph Rowntree Foundation have proposed several concrete measures to mitigate these risks. Among them: establishing a protected minimum floor within Universal Credit to prevent benefit levels from being eroded by debt deductions or the cap itself, and introducing an ‘essentials guarantee’ to ensure that benefits consistently meet the basic cost of living. Without such reforms, the Foundation warns, around 4.2 million children could still be growing up in poverty by 2029, even after the two-child limit is scrapped.

The government, for its part, insists it remains committed to tackling child poverty on multiple fronts. A spokesperson highlighted the Child Poverty Strategy, which aims to lift 550,000 children out of poverty by 2030—“the biggest reduction in a single parliament.” In addition to scrapping the two-child limit, the government is extending Free School Meals, boosting the national living wage, cutting energy bills by £150, and launching a £1 billion Crisis and Resilience Fund to support families in need. These measures, officials argue, represent a holistic approach to alleviating hardship and building resilience among the UK’s most vulnerable households.

Yet, the political debate is far from settled. While Labour’s move has been celebrated by many campaigners and experts, opposition parties have voiced skepticism, with Conservative leader Kemi Badenoch pledging to reinstate the two-child limit if her party returns to power. This partisan divide underscores the contentious nature of welfare reform in Britain, where questions of affordability, fairness, and effectiveness remain at the heart of public discourse.

Looking ahead, the government faces mounting pressure to revisit the benefit cap sooner than the scheduled 2027 review. Anti-poverty campaigners, think tanks, and charities are united in warning that without further action, the promise of the two-child limit’s removal will remain unfulfilled for tens of thousands of families. As the April 2026 deadline approaches, the stakes could hardly be higher for Britain’s children and for the policymakers tasked with securing their future.

For now, the scrapping of the two-child limit stands as a landmark achievement—but whether it delivers the sweeping change envisioned depends on the government’s next moves and its willingness to address the stubborn obstacles that remain.