Carers allowed to earn over the weekly limit without losing out as ‘cliff-edge’ abolished in the budget

The Guardian’s reporting triggered a government-commissioned independent review of carer’s allowance overpayments by disability rights expert Liz Sayce, published last year. It found unpaid carers suffered depression and hardship on a huge scale after falling foul of a series of systemic injustices, including the cliff edge.

In one case highlighted by the review, a carer was penalised when the national minimum wage had increased at a faster rate than the earnings limit. This put her 15p a week above the limit, even though her hours had not changed. Months later, she was told she had incurred a £2,000 penalty for above-limit earnings totalling just £5.

The review found the outdated design of carer’s allowance, coupled with longstanding DWP failures in its administration, meant about 180,000 carers ran up overpayment debts amounting to £300m between 2019 and 2025.

Campaigners welcomed the decision, calling it a “long-overdue reform” although there was disappointment the technical demands of building a new digital system to run the taper means it will not be introduced before the end of the decade.

Carers UK said the cliff-edge plays havoc with carers’ attempts to work part-time around their minimum 35 hours a week of caring duties, with many giving up paid work or refusing promotions, overtime or bonuses because of the risks.

John Healey, the chancellor, told the Guardian the carer’s allowance system had worked against carers. “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.”

As well as unpaid carers, Healey’s budget will benefit an extra 150,000 new parents – including self-employed fathers and partners who have previously missed out – with parental support worth up to £194 a week.

Ministers are also removing import tariffs on more than 100 products, including baked beans, chocolate and gherkins, while also supporting farmers facing higher fertiliser bills and households that rely on paraffin.

There will also be hundreds more Post Office drop boxes, bringing the total to 1,000, to make it more convenient for people to send and return parcels without having to queue.

Healey will also reportedly raise the minimum wage by about 4% to about £13.20 an hour. However, in a sign of government concern over rates of youth unemployment, the chancellor is said to be about to raise youth rates by roughly the same amount, rather than the inflation-busting levels seen in previous budgets.

Labour came to office in 2024 promising to raise the youth rate, which applies to workers under 21, to the same level as the full rate. But ministers have become concerned in recent months that raising the minimum wage for younger workers could be dissuading companies from taking on young employees.

“We are taking on the big challenges facing the country. But that doesn’t mean losing sight of the everyday problems that cost people money or simply aren’t fair,” Burnham said.

“If you’re a nurse driving to work, a parent spending those precious first weeks with your new baby, or an unpaid carer picking up an extra shift, these changes will make life a little easier and put more money back in your pocket.”

Pat McFadden, the work and pensions secretary, said: “We have listened to [carers’] concerns about the cliff-edge built into the system which leaves them financially worse off for taking on a few more hours, or getting a modest pay rise, and intend to bring that to an end.”

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.”

Emily Holzhausen, Carers UK director of policy, 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.”

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