Chancellor Replaces Carer's Allowance Penalty With Taper

Chancellor John Healey will scrap the carer's allowance cliff-edge rule at Wednesday's budget, replacing it with a digital taper system that removes only £1 of allowance for each £1 earned above the weekly earnings limit.

Under the existing rule, exceeding the current £204 weekly earnings limit by a penny forfeits the entire £86.45 weekly payment. A carer who went over by a penny each week for a year would breach the limit by 52p in total but face a repayment of £4,495.40.

The Department for Work and Pensions knew when carers crossed the earnings threshold but did not warn them, placing the duty on carers to report changes. Some carers remained unaware for years, accumulating overpayment debts typically between £2,000 and £5,000, and in some cases as high as £20,000. Welfare officials pursued these debts using recovery legislation designed for organised crime, and some carers were convicted of fraud.

A government-commissioned review by disability rights expert Liz Sayce, published last year, found the outdated design of the allowance and longstanding departmental failures left about 180,000 carers with overpayment debts totaling £300m between 2019 and 2025. The review documented cases of depression and hardship, including one carer penalised 15p a week above the limit when the minimum wage rose faster than the threshold, resulting in a £2,000 penalty for £5 of above-limit earnings.

Healey said the 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."

Work and pensions secretary Pat McFadden said the government had listened to carers' concerns about the cliff-edge and intended to bring it to an end. Carers Trust chief executive Kirsty McHugh called the change "an important and long-overdue reform." Carers UK director of policy Emily Holzhausen said a taper on the earnings limit "should give families much more choice about working and still caring."

The technical work required to build the digital system means the taper will not be introduced before the end of the decade. The measure is among five so-called everyday fixes Healey is announcing ahead of Wednesday's budget, alongside making the 55p per mile business mileage rate permanent for the first 10,000 miles, raising the rate above 10,000 miles to 35p, expanding parental support to 150,000 additional new parents worth up to £194 a week, removing import tariffs on more than 100 products, and adding Post Office drop boxes to reach a total of 1,000.