UK May Scrap Two-Child Benefit Cap: Who Will Be Affected?

The UK government is expected to announce the removal of the long-criticised two-child benefit limit, a policy that has been in place since 2017. According to reporting by The Times’ Waseem Mohamed, Chancellor Rachel Reeves is likely to unveil the change in this week’s budget — a move that could lift 350,000 children out of poverty.

What Is the Two-Child Benefit Limit?

Under current rules, families receiving Universal Credit can claim child-related support for only their first two children. Any third or subsequent child is excluded from additional payments.

If the cap is removed, families will receive £292.81 per month for each additional child beyond the first two.

For example, a single parent with three children would see their total annual support jump from £20,978 to £24,491 — an amount higher than the annual net pay of a full-time minimum-wage worker, which is around £21,807.

350,000 Children Could Be Lifted Out of Poverty

The Child Poverty Action Group (CPAG) estimates that scrapping the cap would immediately reduce child poverty, improving life for 350,000 children.

In 2023–24, 4.5 million children — or 31% of all under-16s — lived in relative poverty after housing costs were considered. Data from the Institute for Fiscal Studies (IFS) shows that poverty is particularly concentrated in larger families:

• 44% of children in families with three or more children live in poverty
• 25% in two-child households
• 21% in single-child households

Will Removing the Cap Discourage Work?

Some experts argue that ending the limit could reduce the financial incentive to work, particularly for parents with three or more children who may receive more in benefits than they would earn in full-time employment.

However, research shows that 70% of poor children already live in working households, suggesting that employment alone is not enough to keep larger families out of poverty.

Who Will Be Most Affected?

The policy change is expected to have a significant impact on ethnic minority families, who are more likely to have larger households. According to the Children’s Commissioner:

• 14% of White British families have three or more children
• 38% of Bangladeshi families
• 41% of Pakistani families

Relative child poverty rates also differ sharply:

• 25% among White children
• Nearly 50% among Black and Asian children

Geographical Disparities: Poverty Highest in Tower Hamlets

Child poverty rates vary widely across the UK.

• Tower Hamlets in London has the highest rate at 46.5%
• Pendle (Lancashire) has seen the steepest increase — child poverty rose 52% since 2017–18
• Cities such as Burnley, Oldham, and Blackburn with Darwen report similarly high levels
• Some areas in Scotland and the East of England have seen declines

A Major Political and Economic Test for Reeves

Whether Rachel Reeves chooses to abolish the two-child limit will represent a major test for the government — balancing social justice, child poverty reduction, and long-term economic sustainability.

The decision is expected to shape the future of welfare policy and the financial wellbeing of hundreds of thousands of UK families.