Benefits to keep frozen cap next year despite end of two-child policy

A Department for Work and Pensions (DWP) minister has given an update on Labour’s decision to freeze the cap on the total amount out-of-work benefits a family can claim, saying it is “the best interest of children”.

The benefit cap – separate to the two-child limit – will be frozen for the fourth year in a row in 2026, it was confirmed at the end of November.

This limits the amount of benefit a non-working household with children can receive to £22,020 a year (or £25,323 in Greater London) – the rate set in 2023/24. This does not apply to universal credit claimants who are caring for disabled people or are severely disabled themselves.

Speaking in the House of Lords, Baroness Maeve Sherlock, a minister of state for the DWP, told peers there are “no plans” to lift the cap.

She added: “The benefit cap aims to incentivise work as, where possible, it is in the best interest of children to be in working households.

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“We are delivering a step change in employment and skills support for parents, enabling parents to balance work and caring responsibilities through high quality, flexible jobs, and improving access to childcare so parents are better able to work.”

There is a statutory obligation on the government to review this level every five years, with the next review being due in November 2027. However, this does not prevent ministers from making decisions on it sooner.

The reiteration of the policy comes despite Labour’s pledge to scrap the two-child benefit limit, often known as cap, from April 2026. The increase families receive in the child element of universal credit for their third or subsequent child from this decision will be counted towards the benefit cap.

This means some families won’t feel the full impact of the change, as the amount they receive will be limited by the cap. And for families that are above the cap already, there will be no increase in income at all.

There were around 124,000 families hit by the benefit cap in October, according the the Child Poverty Action Group (CPAG), containing nearly 300,000 children. The charity had urged the government to scrap the cap alongside the two-child limit, terming the policies ‘evil twins’.

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CPAG researchers argue that removing the cap would lift these children from the deepest poverty at a cost of £300 million. Their analysis showed that the cap leaves an Inner London lone parent with three children renting a private sector, three-bedroom home, with just £3 to live on after rent.

The Resolution Foundation has calculated that one in six children hit by the two-child benefit cap will not fully benefit from its abolition, as their household is either already at – or will reach – the benefit cap.

Alex Clegg, an economist at the influential think tank, said: “The benefit cap arbitrarily breaks the link between need and entitlement in the benefit system. It doesn’t impact as many families as the two-child limit, but those who are hit by it can be pushed into acute hardship in a similar way.

“The fact that the value of the cap is frozen by default – and has been cut in cash terms since it was first introduced in 2013 – means its impact gets worse over time. The real value of the benefit cap for families is £14,500 lower in 2025-26 than when it was introduced in 2013-14.”

A DWP spokesperson said: “We know that work is best route out of poverty, which is why we're transforming employment and skills support for parents, with high-quality, flexible jobs and improved access to childcare.”