Healey to replace carer benefit cliff edge

Chancellor John Healey will announce a digital taper system for carer's allowance in the budget presented on Wednesday. The move replaces the existing cliff-edge rule, which forced unpaid carers to repay their entire weekly benefit if their earnings exceeded the threshold by even a single penny.

The current system creates a financial penalty for marginal increases in income. The weekly earnings limit is set at 204 pounds. If a carer earns more than that amount, they lose the full 86.45 pounds in allowance for that week. A carer who exceeded the limit by one penny for a full year would owe 4,495.40 pounds in back pay, despite the actual excess earnings being only 52 pence.

A government-commissioned review found that approximately 180,000 carers accumulated overpayment debts totaling 300 million pounds between 2019 and 2025. The Department for Work and Pensions was aware of these breaches but did not issue warnings, leaving many carers unaware of their liabilities for years. Some debts reached 20,000 pounds, and officials used legislation designed for organized crime cases to recover funds from unpaid carers.

Under the proposed taper, only one pound of allowance will be deducted for every additional pound earned above the limit. This structure ensures that carers are not financially worse off for working extra hours or receiving pay rises. The change addresses a design flaw where the benefit system effectively discouraged part-time work and career progression among unpaid carers.

Healey described the old system as working against carers, noting that doing an extra shift or getting a small pay rise could leave someone worse off. He stated that the new taper will give carers the freedom to work and earn more without suddenly losing all their support. The announcement is part of a set of five everyday fixes released ahead of the budget.

The fiscal backdrop constrains the chancellor's options due to global events, including the conflict in Iran. Treasury insiders expect the budget to be low-key, with major tax and spend decisions delayed until the spending review next year. Some Labour MPs have expressed anxiety over the scale of the announcements, particularly after Andy Burnham came to power promising major change.

Other measures in the budget include making higher tax-free mileage rates permanent. The 55 pence per mile rate for the first 10,000 business miles will be locked in, and the rate above 10,000 miles will increase to 35 pence per mile. The Treasury estimates this will benefit about 3 million people who use their own vehicles for work.

The budget will also expand parental support to an additional 150,000 new parents, including self-employed fathers and partners. This support is worth up to 194 pounds a week. Ministers are removing import tariffs on more than 100 products, including baked beans, chocolate, and gherkins, while supporting farmers facing higher fertilizer costs.

Work and Pensions Secretary Pat McFadden said the government has listened to carers' concerns about the cliff edge. He confirmed the intention to end the rule that leaves carers financially worse off for taking on a few more hours or getting a modest pay rise. Carers UK noted that the new taper should give families more choice about working and still caring.