Child benefit and the two-child cap: what's changing?
The UK Budget 2025 has brought significant changes to support for families with children. Whilst some headlines have conflated two distinct benefits, it's important to understand what's actually changing and how it might affect your household finances.
Understanding the difference between Child Benefit and Universal Credit
Many reports have used the term "child benefit" when discussing the Budget changes, but the two-child limit being scrapped actually relates to Universal Credit, not Child Benefit itself.
Child Benefit is a payment available to anyone responsible for a child, regardless of income (though high earners face a tax charge). It has never been subject to a two-child limit, and you can claim it for as many children as you're responsible for.
Universal Credit's Child Element is the additional amount low-income families receive within their Universal Credit payment for each child. This is where the two-child limit has applied since 2017.
What is the two-child limit?
Introduced in April 2017, the two-child limit prevented families from receiving the Child Element of Universal Credit for a third or subsequent child born on or after 6 April 2017. Families could only receive this support for their first two children, regardless of how many children they had.
This policy also applied to Child Tax Credits, though these ended on 5 April 2025.
What's changing from April 2026?
The government has announced that the two-child limit will be removed entirely from Universal Credit. From April 2026, families receiving Universal Credit will be able to claim the Child Element for all their children, not just the first two.
The measure is expected to lift 450,000 children out of poverty, with particularly significant impacts in areas with higher child poverty rates. In Scotland, 95,000 children will benefit, whilst 69,000 children in Wales will see their families receive additional support.
How much extra will families receive?
Families with three or more children will see a substantial increase in their Universal Credit payments. In 2026-27, families receiving Universal Credit will be eligible for just over £3,647 for each child in their household born after April 2017.
For a family with three children born after April 2017:
- Before the change: Around £7,294 per year (for two children only)
- After the change: Around £10,942 per year (for all three children)
This represents an increase of approximately £3,648 annually for such families.
It's worth noting that the overall benefit cap, which limits total welfare payments a household can receive, will still apply. This currently stands at £25,323 in Greater London and £22,020 elsewhere in the UK.
Child Benefit rates: what you need to know
Whilst the two-child limit removal doesn't affect Child Benefit directly, it's helpful to understand the current rates and upcoming increases.
Current rates (2025-26)
| Child | Weekly amount | Annual amount |
|---|---|---|
| Eldest or only child | £26.05 | £1,354.60 |
| Each additional child | £17.25 | £897.00 |
April 2026 rates
Child Benefit is set to rise by 3.8% in April 2026, meaning families will be eligible for £27.05 for their eldest child and £17.90 for each additional child.
| Child | Weekly amount | Annual amount |
|---|---|---|
| Eldest or only child | £27.05 | £1,406.60 |
| Each additional child | £17.90 | £930.80 |
Remember, there's no limit on how many children you can claim Child Benefit for, and this has always been the case.
Who benefits from these changes?
The removal of the two-child limit will primarily benefit:
- Families receiving Universal Credit with three or more children born after April 2017
- Low-income working families who've been unable to claim support for all their children
- Single parents with larger families struggling with the cost of living
The change won't directly affect families who:
- Don't receive Universal Credit
- Only have one or two children
- Had all their children before April 2017 (as they weren't subject to the limit)
The high income child benefit charge
One aspect of Child Benefit that remains unchanged is the high income child benefit charge (HICBC). If you or your partner earns over £60,000, you'll face a tax charge.
The charge works out at 1% of your Child Benefit for every £200 of income between £60,000 and £80,000. If either partner earns £80,000 or more, the charge equals the full amount of Child Benefit received.
You can still claim Child Benefit even if you'd face the full charge, as claiming ensures you receive National Insurance credits that count towards your State Pension.
Why the government made this change
According to the Budget document, growing up in poverty means that an individual is more likely to end up out of education, employment or training, with children growing up in poorer households earning around 25% less at age 30 than their peers.
The removal of the two-child limit is described as the quickest and most cost-effective way to reduce child poverty over this Parliament. The measure is funded through various policies announced in the Budget, including reforms to Motability tax reliefs and increased efforts to tackle fraud and error in the benefits system.
What you need to do
If you already receive Universal Credit: You don't need to take any action. The Department for Work and Pensions will automatically adjust your payments from April 2026 to include the Child Element for any third or subsequent children who were previously excluded.
If you're not currently claiming Universal Credit but might be eligible: Consider whether you should make a claim, particularly if you have three or more children. Use the benefits calculator on the GOV.UK website to check your potential entitlement.
If you're not claiming Child Benefit: You can claim at any time, regardless of these changes. Make your claim as soon as possible, as it can be backdated for only three months.
Looking ahead
These changes represent one of the most significant shifts in family benefits policy in recent years. The government has emphasised that lifting children out of poverty not only improves their life chances but also benefits the economy in the long term.
For families who've been managing on reduced support since 2017, the removal of the two-child limit could make a meaningful difference to their household budgets from April 2026 onwards.
