Update for Universal Credit Recipients: Two-Child Limit Removal and The Benefit Cap
All of the following information has been provided by the Department of Work and Pensions.
Removal of Two-Child Limit
From April 2026, the two-child limit will end. Families will be able to receive the Universal Credit child element for all children, regardless of family size.
Impact on Child Poverty
This policy change aims to reduce child poverty by providing equitable financial support to larger families.
Customer Reporting Responsibilities
Customers must report births and child-related changes promptly to ensure accurate Universal Credit payments.
Policy Limitations Remain
Despite this change, rules like the Benefit Cap still apply and may limit total benefit payments.
What is the Benefit Cap?
The Benefit Cap remains in place and may limit the total amount of benefit a working-age household can receive. If combined benefits are above the cap, Universal Credit will reduce payment so the total stays within the cap. Benefit cap: Benefits affected by the cap - GOV.UK
| Location & Household | Per month | Per week |
| Outside Greater London – Couples or single parents | £1,835 | £423.46 |
| Outside Greater London – Single adults | £1,229.42 | £283.71 |
| Inside Greater London – Couples or single parents | £2,110.25 | £486.98 |
| Inside Greater London – Single adults | £1,413.92 | £326.29 |
Who is not affected by the Benefit Cap?
Income-Based Exemption
Households earning £846 or more monthly after tax and National Insurance are exempt from the Benefit Cap.
Disability and Care Benefits
Recipients of disability-related benefits and Carer’s Allowance are exempt from the cap to support vulnerable groups. Therefore, Households are exempt from the Benefit cap where any of the following apply:
1. Universal Credit award includes Limited Capability for Work and Work-Related Activity (LCWRA),
2. Universal Credit award includes Carer element or household receives Carer’s Allowance.
3. Customer / Partner / Child receives Personal Independence Payment (PIP), Disability Living Allowance (DLA), Attendance Allowance, Guardian’s Allowance, or ESA with the support component.
Age-Related Exemption
Individuals over State Pension age are exempt, though mixed-age couples may still face the cap.
Grace Period for Recent Workers
Customers claiming Universal Credit because they have stopped work or their earnings went down, may have a grace period of 9 months where the cap does not apply. To qualify, the customer must have earned at least the earnings threshold in each of the 12 months before - £793 per month up to 31 March 2025, and £846 per month from 1 April 2025.
Reporting Requirements
Customers must report previous earnings accurately to ensure the grace period applies correctly to Universal Credit claims.
Example Family Claiming Universal Credit
Household:
· Two adults (both working age)
· Four children (ages 2,5,6 and 8)
· Renting privately outside Greater London
· Combined monthly earnings: £600 (after tax and NI)
· No disability benefits, no Carer's Allowance
Before April 2026 (two-child limit still applies)
· Universal Credit child element is only paid for two children.
· Family receives UC for housing costs, standard allowance, and two child elements.
· Approximate UC child element: £292 per child (for first two children only).
· Total UC award: Standard allowance + housing + 2 child elements.
After April 2026 (two-child limit removed)
· Family can now receive UC child element for all four children.
· Additional two child elements added (approx. £292 each).
· Increase in UC award: Around £584 extra per month.
· This significantly boosts household income - but the Benefit Cap still applies.
Impact of the Benefit Cap
Benefit Cap threshold (outside Greater London)
· Couples / single parents: £1,835 per month.
Scenario A - Family is capped:
· After adding the extra child elements, total benefits exceed £1,835.
· UC payment is reduced so total stays at £1,835.
· Result: The family does not see the full £584 increase - they only get up to the cap limit.
Scenario B - Family is exempt from the cap:
· If one adult earns £846+ per month, or the household has LCWRA, Carer's Allowance, or disability benefits, the cap does not apply.
· In that case, the family receives the full extra £584, making a real difference to their budget.
Action to take for Customers:
Report Changes Promptly
Customers should update births and household changes quickly in their Universal Credit journal to stay compliant.
Use Benefit Cap Calculator
Using the online Benefit Cap calculator helps customers understand if they are affected by payment limits.
Seek Work Coach Guidance
Speaking with a Work Coach provides personalised support and clarity about benefits and next steps.
Apply for Discretionary Payments
Customers struggling with rent due to caps should apply for Discretionary Housing Payments to ease financial burden.
