Controversial carer’s allowance rule to be abolished in budget

The government is set to scrap the carer’s allowance earnings cliff edge after thousands of unpaid carers were left with large debts for exceeding a weekly limit.

Chancellor of the Exchequer John Healey has outlined plans for a new digital taper system ahead of the Budget on Wednesday 28 October, when the change is due to be formally announced.

The reform follows a Guardian investigation that revealed how carers accumulated debts worth thousands of pounds after exceeding earnings thresholds by as little as a few pence.

Kirsty McHugh, chief executive of Carers Trust, said: “It is great news that the government is acting to remove the carer’s allowance cliff-edge. This is an important and long-overdue reform.

“We would urge the government to use this change as a springboard for a wider and deeper reform of carer’s allowance – a benefit that remains stuck in the 1970s and must be made fit for the future.”

Under the current system, unpaid carers who earn more than the weekly limit of £204 lose their entire carer’s allowance payment of £86.45 for that week.

Someone exceeding the threshold by just 1p each week for a year could be required to repay £4,495.40, despite earning only 52p above the permitted amount.

The Department for Work and Pensions (DWP) was aware when carers exceeded the earnings limit but did not warn them, maintaining that individuals were responsible for reporting changes in their circumstances.

Some carers remained unaware of breaches for months or years, building up overpayment debts typically ranging from £2,000 to £5,000. In some cases, debts reached £20,000.

Under the proposed system, carer’s allowance would be reduced by £1 for every additional £1 earned above the threshold, rather than carers losing an entire week’s benefit.

However, the technical work needed to develop the digital system means the change is not expected to take effect before the end of the decade.

The decision follows a government-commissioned independent review of carer’s allowance overpayments by disability rights expert Liz Sayce, prompted by the Guardian’s investigation.

Published last year, the review found that approximately 180,000 carers accumulated overpayment debts totalling £300m between 2019 and 2025.

It identified systemic problems in the design and administration of the benefit, alongside widespread financial hardship and depression among affected carers.

One woman exceeded the threshold by 15p a week after the national minimum wage increased faster than the allowance earnings limit.

Although her working hours had not changed, she was told months later that she owed £2,000 after earning just £5 above the permitted amount.

Healey acknowledged that the rules could penalise carers for increasing their earnings.

He said: “That means doing an extra shift or getting a small pay rise can actually leave someone worse off. That cannot be right.

“So at this budget on Wednesday, we’re ending that cliff-edge.

“Carer’s allowance will instead taper as earnings increase, giving carers the freedom to work a little more and earn a little more without suddenly losing all their support.”

Campaigners welcomed the proposed change but called for wider reforms, while expressing disappointment over how long implementation could take.

Emily Holzhausen, director of policy at Carers UK, said the existing system had caused considerable anxiety among unpaid carers.

She said: “We have countless stories from carers who have shared their deep fears of going just a few pence over the earnings limit and losing all of their benefit.

“It’s absolutely right that the chancellor is thinking of practical changes that will make their lives easier. A taper on the earnings limit should give families much more choice about working and still caring.”

The reform is among five measures outlined ahead of Wednesday’s Budget, including changes to tax-free mileage allowances and additional parental support.

Work and pensions secretary Pat McFadden said ministers had listened to carers’ concerns about the earnings threshold and intended to end the financial penalties associated with taking on additional work.

Until the new system is introduced, carers will remain subject to the existing earnings cliff-edge rules.