The government has announced a major reform to Carer's Allowance that will remove the earnings threshold 'cliff edge', a change expected to benefit around 48,000 carers in England and Wales.
In his first Budget, Chancellor John Healey confirmed that the Weekly Earnings Limit will be reformed so that carers no longer lose their entire benefit for exceeding the limit by a single penny. Instead, earnings above the limit will be subject to a taper that reduces the benefit payment as earnings increase.
Current rules and the 'cliff edge' problem
Carer's Allowance is a £86.45 a week payment for people over 16 who spend at least 35 hours per week caring for someone with a disability or health condition. Under the current rules, claimants can only receive the benefit if they earn £196 per week or less. Going over the £196 limit means losing the payment entirely for that week.
This 'cliff edge' has led to some claimants receiving notices from the DWP to pay back money they received after unknowingly exceeding the threshold and not declaring it. Charities have previously branded the issue of people being penalised for going over their earnings limit, even by as little as a few pence per week, a "scandal".
Review findings and the taper announcement
A year-long review, whose findings were published in 2025, concluded that many carers felt they were "treated as criminals, with resulting feelings of fear and shame". The review, carried out by Liz Sayce, found that the way the DWP "treats earnings, especially in averaging and allowable expenses, is inconsistent and unclear, meaning carers were unable to comply with the rules".
The review has resulted in thousands of unpaid carers who received the allowance between 2015 and September 2025 in England and Wales having their overpayments reviewed.
According to the Budget document, the reform gives carers "greater flexibility to work without the fear of losing out financially". The taper will be implemented in 2030, following the development of a new IT system that will automatically adjust payments in line with the taper.
Charity response
Carers UK welcomed the change, calling it a "very practical measure that carers have been asking for". The charity said that six out of 10 carers who had experienced issues with the earnings limit found they were unable to work more hours or take on higher paid work, and 41 per cent of these carers had left paid work because of the earnings limit.
Emily Holzhausen CBE, director of policy and public affairs at Carers UK, said: "This is really welcome news. The cliff edge earnings limit on Carer's Allowance is one of the most punitive in the benefits system - an 'all or nothing' measure. There is far too much uncertainty and worry for carers about going over the cliff edge.
"Unpaid carers are shocked and horrified to find they lose 100 per cent of their benefit, rather than £1 for every additional £1 they earn. They have told us that they have never understood why the system is so inflexible."
Helen Walker, chief executive of the charity, added: "The announcement of funding for a taper in Carer's Allowance in England and Wales should give carers the flexibility to work as much as they are able to alongside their caring role. It will also be one of the biggest changes to the design of the social security benefit since it was introduced in 1976. We hope that governments in Scotland and Northern Ireland follow suit.
"While we would have wanted to see a taper coming into force sooner so that carers can benefit from it, we recognise that building a new IT system will take time because of the complexity of the benefit. We also want the new system to be robust and tested with carers to ensure that it works well into the future."
