Healey to replace carer benefit cliff-edge with digital taper in budget

Chancellor John Healey will announce the end of the carer’s allowance cliff-edge rule in the budget on Wednesday. The change replaces a binary system with a digital taper that reduces benefit payments gradually as earnings rise.

Under the current system, a carer who earns more than the weekly limit of £204 loses the entire allowance for that week. The weekly payment is currently £86.45. A carer who earns just one penny over the limit for a full year breaches the threshold by 52p. Under the old rules, that carer would owe a repayment of £4,495.40.

Healey stated that the current structure works against carers. He noted that doing an extra shift or receiving a small pay rise can leave a person financially worse off. The new taper will remove only £1 of support for every additional £1 earned above the limit. This ensures carers are not penalised for working more hours or receiving a raise.

The Department for Work and Pensions previously refused to warn carers when they breached earnings limits. Officials insisted the responsibility to report changes lay with the carers. As a result, thousands of people remained unaware of their breaches for years. Overpayment debts typically ranged from £2,000 to £5,000, with some cases reaching £20,000.

An independent review commissioned by the government found that approximately 180,000 carers accumulated overpayment debts totalling £300 million between 2019 and 2025. The review cited the outdated design of the benefit and administrative failures by the DWP. In one case, a carer was penalised £2,000 because the national minimum wage rose faster than the earnings limit, pushing her 15p over the threshold despite no change in hours.

Healey described the announcement as one of five everyday fixes included in the budget. The government faces a tight fiscal backdrop due to global events, including the conflict in Iran. Treasury insiders described the budget as low-key, with major tax and spend decisions deferred until the spending review next year.

Other measures in the budget include making higher tax-free mileage rates permanent. The rate for the first 10,000 business miles is set at 55p per mile, while the rate above 10,000 miles will be 35p per mile. The Treasury estimated this move will benefit about 3 million employees and self-employed individuals. The government will also extend parental support to an additional 150,000 new parents, including self-employed fathers and partners.

Ministers are removing import tariffs on more than 100 products, such as baked beans, chocolate, and gherkins. The budget also includes support for farmers facing higher fertiliser bills and households relying on paraffin. Post Office drop boxes will increase to a total of 1,000 to facilitate parcel returns without queuing.

Healey is expected to raise the minimum wage by about 4% to approximately £13.20 per hour. Youth rates for workers under 21 will also rise by a similar amount. Labour had previously promised to equalise the youth rate with the full rate but has moved away from that plan due to concerns about youth unemployment.

Work and Pensions Secretary Pat McFadden said the government listened to carers’ concerns about the cliff-edge. Carers Trust chief executive Kirsty McHugh called the reform long-overdue but urged further changes to a system she described as stuck in the 1970s. Carers UK policy director Emily Holzhausen said the taper should give families more choice in balancing work and care duties.