Chancellor Healey to replace carer allowance cliff edge with taper in Wednesday budget

Chancellor John Healey will announce a new digital taper system for carer’s allowance in Wednesday’s budget, ending the punitive cliff edge rule that has trapped thousands of unpaid carers in debt. The change replaces a binary penalty with a gradual reduction in payments as earnings rise.

Under the current system, a carer who earns even a penny more than the weekly limit of £204 forfeits the entire week’s allowance of £86.45. A carer who exceeded the limit by just 52p over the course of a year would owe £4,495.40 in repayments.

The Department for Work and Pensions knew when carers breached the earnings limit but did not send warnings. Officials stated the responsibility lay with the carer to report changes. Many people went years without realizing they had accumulated overpayment debts.

These debts typically ranged from £2,000 to £5,000, but some reached £20,000. Welfare officers used legislation designed to recover funds from organized crime to chase these payments. Some carers were even convicted of fraud.

The new tapered system will remove only £1 of carer’s allowance for every additional £1 earned above the limit. This ensures carers are not financially worse off for working extra hours or receiving a pay raise.

A government-commissioned review by disability rights expert Liz Sayce found that about 180,000 carers incurred £300 million in overpayment debts between 2019 and 2025. The review cited systemic failures, including a case where a carer owed a £2,000 penalty for earning just £5 above the limit after a national minimum wage increase.

Healey described the previous system as working against carers. He stated that doing an extra shift or getting a small pay rise should not leave someone worse off. The budget announcement follows a Guardian investigation that revealed the DWP had ignored warnings from a whistleblower about the distress caused by the rule.

The digital taper will not be introduced before the end of the decade due to technical requirements. Campaigners welcomed the move as a long-overdue reform. Carers UK noted that the cliff edge previously forced many to give up paid work or refuse promotions to avoid financial risk.

The carer allowance change is one of five everyday fixes announced ahead of the budget. Other measures include making higher tax-free mileage rates permanent and removing import tariffs on more than 100 products. The government also plans to extend parental support to an extra 150,000 new parents, including self-employed fathers.

Work and Pensions Secretary Pat McFadden said ministers have listened to concerns about the cliff edge. He confirmed the intent to end the practice that leaves carers financially worse off for taking on extra hours or receiving modest pay rises.