Carer Allowance: Taper Replaces Cliff-Edge

A rule that punished unpaid carers for earning slightly more than a set threshold will be scrapped.

Chancellor John Healey is set to announce a digital taper for carer’s allowance in his budget on Wednesday. This change effectively removes the cliff-edge mechanism that has been a source of financial distress for many families.

The previous system operated on a binary basis. If a carer earned more than the weekly limit of £204, they lost their entire allowance for that week, which stands at £86.45. Under the new taper, for every extra pound earned above the limit, only one pound of the allowance is removed. This ensures that working more hours or receiving a small pay rise no longer leaves a carer financially worse off.

The cost of the old rule was substantial. Between 2019 and 2025, approximately 180,000 carers accumulated overpayment debts totaling £300 million. An independent review led by Liz Sayce found that these debts were often the result of systemic failures in the Department for Work and Pensions (DWP). In some cases, carers faced debts as high as £20,000.

The DWP previously refused to warn carers when they breached the earnings limit. The department argued that the responsibility lay with the carer to report changes. This approach meant that many individuals were unaware of their breach for years. In one case cited by the review, a carer was penalized because the national minimum wage rose faster than the earnings limit. She ended up 15p over the limit for the year and owed £2,000 for over-earnings totaling just £5.

Treasury officials described the upcoming budget as low-key due to a tight fiscal environment influenced by global events, including the conflict in Iran. Healey is making this change as part of a series of everyday fixes ahead of the spending review next year. His room for maneuver is constrained, but the government is prioritizing these targeted adjustments.

John Healey told the Guardian that the old system worked against carers. He stated that doing an extra shift or getting a small pay rise could leave someone worse off, a situation he described as wrong. Under the new rules, carers will have the freedom to work a little more without suddenly losing all their support.

The change is one of several measures in the budget. Healey is also making higher tax-free mileage rates permanent, setting the rate at 55p per mile for the first 10,000 business miles. This move benefits about 3 million people who use their own vehicles for work. The budget will also support 150,000 new parents, including self-employed fathers, with parental support worth up to £194 a week.

Additional measures include removing import tariffs on more than 100 products, such as baked beans and chocolate. The government is also adding hundreds of Post Office drop boxes, bringing the total to 1,000. Healey is reportedly raising the minimum wage by about 4% to £13.20 an hour, while also increasing youth rates by a similar margin to address concerns over youth unemployment.

Work and Pensions Secretary Pat McFadden said the government had listened to carers' concerns about the cliff-edge. He confirmed the intention to end the system that left carers financially worse off for taking on a few more hours. Carers UK director of policy Emily Holzhausen noted that the taper should give families more choice about working and still caring.