Chancellor to end carer penalty in Wednesday's budget

Chancellor John Healey will announce the end of the carer's allowance penalty in his budget speech on Wednesday.

The measure replaces a binary rule with a tapered system, meaning carers will lose only one pound of allowance for every additional pound earned above the current weekly limit of £204. Under the previous system, earning a single penny over the limit resulted in the forfeiture of the entire £86.45 weekly payment. A carer who exceeded the limit by a total of 52p over a year would have been required to repay £4,495.40.

The Department for Work and Pensions was aware when carers breached the earnings threshold but declined to issue warnings, stating that the responsibility to report changes lay with the carers. Many individuals remained unaware of their status for years, accumulating overpayment debts that typically ranged from £2,000 to £5,000, though some reached as high as £20,000. An independent review by disability rights expert Liz Sayce found that approximately 180,000 carers incurred a combined debt of £300 million between 2019 and 2025.

Healey described the existing system as working against carers, noting that taking an extra shift or receiving a small pay rise could leave someone financially worse off. He stated that the new taper will give carers the freedom to work more and earn more without suddenly losing all their support. The announcement is part of five "everyday fixes" unveiled ahead of the budget, a period when Treasury officials say the government's fiscal room for manoeuvre is constrained by global events, including the conflict in Iran.

Other measures in the budget include making higher tax-free mileage rates permanent, with the 55p per mile rate for the first 10,000 business miles locked in. The Treasury estimates this move will benefit about 3 million people who use their own vehicles for work. Ministers are also removing import tariffs on more than 100 products, including baked beans, chocolate, and gherkins, while supporting farmers facing higher fertiliser bills.

The budget will also extend parental support worth up to £194 a week to an additional 150,000 new parents, including self-employed fathers and partners. Healey is expected to raise the minimum wage by roughly 4% to about £13.20 an hour. Work and pensions secretary Pat McFadden said the government has listened to concerns about the cliff edge and intends to bring it to an end.

Campaigners welcomed the decision as a long-overdue reform, though they noted that the new digital system will not be introduced before the end of the decade. Emily Holzhausen, director of policy at Carers UK, said the taper should give families more choice about working and caring. Kirsty McHugh, chief executive of Carers Trust, urged the government to use this change as a springboard for wider reform of a benefit that remains stuck in the 1970s.