Prime Minister Andy Burnham has announced the end of the Carer's Allowance 'Cliff Edge', a rule that caused people to lose their entire benefit if they earned just 1p over the threshold.
What is the Carer's Allowance Cliff Edge?
Carer's Allowance pays £86.45 a week to those who care for someone for at least 35 hours per week, provided the person being cared for already claims a benefit such as PIP, Disability Living Allowance or Attendance Allowance.
The benefit includes an earnings rule with a limit of £204 per week. If a claimant earns even a single penny more than £204, they lose the entire benefit, not just the portion above the threshold. Campaigners, including Martin Lewis, have urged action on this issue for years.
The New £1 Rule
Andy Burnham and HM Treasury have announced the issue is being fixed with a new £1 rule that tapers earnings gradually. In a release, the government said it is ending the cliff edge so unpaid carers no longer lose their entire allowance for earning a penny over the Weekly Earnings Limit, equivalent to 16 hours of the National Living Wage. Instead, only £1 of support will taper away for every additional £1 earned.
Martin Lewis welcomed the news, saying: "Hurrah. That is very good news. It was one of the things on my list a couple of months ago." He noted, however, that it will not happen straight away.
How the New System Will Work
Lewis explained that the change will only come in during 2030-31, with the delay attributed to the need to fix the IT system to avoid overpayment issues. Under the new system, carers receive the full amount up to £204 of earnings a week, then for each £1 earned over that, they lose £1 of allowance.
In practice, if a carer earns over £204 but less than £290.45 a week, adding earnings to Carer's Allowance always results in a total of £290.45 a week. This means within those thresholds, carers are not better off from work at that point, but unlike now, they are not losing money. Currently, those earning between £204 and £290.45 a week receive less because the allowance is gone and extra earnings did not make up for it.
Lewis added: "So while this isn't perfect it is a big step forward. It reduces the disincentive to work."
Reactions from Carer Organisations
Carers Trust Chief Executive Kirsty McHugh said: "It is great news that the Government is acting to remove the Carer's Allowance cliff edge. This has long been a concerning part of our benefits system, penalising thousands of carers who are juggling paid work with their caring role."
Emily Holzhausen CBE, Director of Policy at Carers UK, said: "We have been calling for a taper to the earnings limit and an end to the cliff edge on Carer's Allowance for many years and we're pleased that the Chancellor has committed to this next step." She noted that evidence from unpaid carers found many having to give up part-time paid work or turn work down to avoid going over the limit and losing 100% of their allowance, and that the change should help reduce overpayments related to earnings.
