Carer's Allowance: Chancellor To Replace Earnings Cliff With Taper

Unpaid carers will soon be able to earn slightly above the weekly limit without forfeiting their entire payment. Chancellor John Healey is set to announce on Wednesday that the current rule, which cancels a week's allowance if earnings exceed the limit by even a penny, will be replaced with a gradual reduction. Under the new system, one pound of allowance will be removed for every additional pound earned above the limit. The current earnings limit is £204 per week, and the allowance is £86.45.

The change addresses a rule that has generated significant debt for carers. A carer who earned one penny over the limit each week for a year would have breached the total by 52p but been required to repay £4,495.40. The Department for Work and Pounds was aware of breaches but did not warn carers, stating that it was their responsibility to report changes. Many remained unaware of violations for years, resulting in overpayment debts typically ranging from £2,000 to £5,000, with some cases reaching £20,000.

The issue received attention following an investigation by The Guardian. That reporting led to a government-commissioned independent review by disability rights expert Liz Sayce, published last year. The review concluded that outdated system design and administrative failures resulted in approximately 180,000 carers accumulating £300 million in overpayment debts between 2019 and 2025.

In one case documented by the review, a carer was penalized because the national minimum wage increased faster than the earnings limit. This left her 15p above the limit even though her hours were unchanged. Months later, she was informed of a £2,000 penalty for above-limit earnings totaling just £5.

The chancellor addressed the planned change ahead of Wednesday's budget. "That means doing an extra shift or getting a small pay rise can actually leave someone worse off. That cannot be right," Healey said. "So at this budget on Wednesday, we're ending that cliff-edge."

Carers UK director of policy Emily Holzhausen said the change would provide families with more choice regarding work and care. Carers Trust chief executive Kirsty McHugh called the reform long-overdue but requested additional changes to the allowance system.

The technical work required to build the digital system for the taper means it will not be implemented before the end of the decade.

The announcement is one of five measures Healey plans to introduce on Wednesday. Other measures include making the 55p per mile rate for the first 10,000 business miles permanent and increasing the rate above that threshold to 35p per mile, which the Treasury said would affect about 3 million people. The budget will also extend parental support to 150,000 additional new parents, worth up to £194 a week, remove import tariffs on more than 100 products, and add Post Office drop boxes to reach a total of 1,000.