Carers to keep allowance when earning slightly over limit as budget scraps cliff-edge rule

A rule that has pushed unpaid carers into debt over tiny earnings breaches is to be abolished, according to the Guardian. Chancellor John Healey will announce a digital taper system for carer's allowance in Wednesday's budget, ending what many regard as one of the most feared and unfair practices in the UK benefit system.

Under the current cliff-edge rule, a carer who earns even a penny above the weekly earnings limit, now £204, loses that whole week's carer's allowance payment, currently £86.45. A carer who was a penny over the limit for a year would exceed it by 52p in total, yet would be asked to repay £4,495.40.

The Department for Work and Pensions (DWP) knew when carers crossed the threshold but did not warn them, insisting that carers must report any changes themselves. Many spent long periods unaware of a breach, sometimes for years. Overpayment debts were typically between £2,000 and £5,000, though some reached £20,000. A Guardian investigation found that these debts were pursued using legislation designed to recover money from drug dealers and organised crime bosses, and that some carers were convicted of fraud.

Under the new approach, £1 of carer's allowance will be removed for every extra £1 earned above the limit. Carers will therefore no longer be left worse off for working more hours or receiving a pay rise. Campaigners welcomed the change but expressed disappointment that the technical demands of building the digital system mean it will not arrive before the end of the decade.

The reform follows the Guardian's reporting, which revealed that the DWP had long known of the distress the rule caused, including through warnings from a whistleblower. That reporting prompted a government-commissioned independent review of overpayments by disability rights expert Liz Sayce, published last year. It found that about 180,000 carers ran up overpayment debts totalling £300m between 2019 and 2025, and that many suffered depression and hardship. In one case, a carer was 15p a week over the limit because the minimum wage rose faster than the earnings limit. She was later told she owed a £2,000 penalty for above-limit earnings totalling just £5.

Healey said the system had worked against carers. "That means doing an extra shift or getting a small pay rise can actually leave someone worse off. That cannot be right," he told the Guardian. Work and pensions secretary Pat McFadden said the government had listened to carers' concerns about the cliff-edge.

The change is one of five "everyday fixes" announced ahead of the budget. Higher tax-free mileage rates will become permanent, with 55p per mile for the first 10,000 business miles and 35p per mile beyond that, which the Treasury said would benefit about 3 million people. An extra 150,000 new parents, including self-employed fathers and partners who previously missed out, will receive parental support worth up to £194 a week. Import tariffs will be removed on more than 100 products, including baked beans, chocolate and gherkins, and the Post Office will add hundreds more drop boxes to reach 1,000. Healey is also reportedly set to raise the minimum wage by about 4% to roughly £13.20 an hour, with youth rates rising by a similar amount amid concern over youth unemployment.

Treasury insiders have warned that the budget will be low-key because of a tight fiscal backdrop shaped by global events including the conflict in Iran, with harder tax and spending decisions left to next year's spending review. Some Labour MPs are anxious about the scale of the announcements after Andy Burnham came to power promising major change.

Kirsty McHugh, chief executive of Carers Trust, called the move "an important and long-overdue reform" and urged wider changes to a benefit she said "remains stuck in the 1970s". Emily Holzhausen of Carers UK said a taper "should give families much more choice about working and still caring."