Chancellor to End Carer Allowance Penalty in Wednesday Budget

The UK government will scrap the carer's allowance earnings limit in Chancellor John Healey's budget on Wednesday. The move replaces a binary rule with a gradual reduction in benefits as income rises.

Under the current system, an unpaid carer earning 204 pounds per week loses their entire 86.45 pound allowance if they earn one extra penny. A carer exceeding the limit by a single penny over a 52 week period faces a repayment debt of 4,495.40 pounds. The new digital taper system will deduct only one pound of allowance for every additional pound earned above the threshold.

The Department for Work and Pensions knew of these breaches but did not warn carers, leaving many unaware until debts accumulated. An independent review by disability rights expert Liz Sayce found that approximately 180,000 carers accumulated overpayment debts totaling 300 million pounds between 2019 and 2025. Some individuals incurred debts as high as 20,000 pounds. In one documented case, a carer owed 2,000 pounds for exceeding the limit by a total of just 5 pounds over several months.

Healey stated that the old system left people financially worse off for taking extra shifts or receiving pay raises. He said the taper gives carers the freedom to work more without suddenly losing all support. The change is one of five everyday fixes announced ahead of the budget, which officials describe as constrained by the fiscal impact of the conflict in Iran.

Other measures in the budget include making higher tax-free mileage rates permanent, with 55p per mile for the first 10,000 business miles and 35p per mile thereafter. This benefits an estimated 3 million people who use their own vehicles for work. The government will also remove import tariffs on over 100 products, including baked beans and chocolate, and install 1,000 Post Office drop boxes for parcel returns.

Campaigners welcomed the reform but noted the new digital system will not be fully operational before the end of the decade. Carers UK director of policy Emily Holzhausen said the taper should give families more choice about working while caring. Work and Pensions Secretary Pat McFadden said the government intended to end the rule that left carers financially worse off for modest increases in income.

The budget will also raise the national minimum wage by about 4% to 13.20 pounds per hour. Healey will provide parental support worth up to 194 pounds per week for an additional 150,000 new parents, including self-employed fathers and partners.