DWP Analysis Reveals Thousands Will See No Benefit from Two-Child Limit Removal
An official impact assessment from the Department for Work and Pensions has revealed that approximately 50,000 low-income families currently affected by the two-child benefit limit will gain nothing when the policy is lifted in April. The analysis confirms that a separate benefit cap – which limits the total amount a household can receive – will prevent these families from seeing any financial improvement despite the significant policy change.
Limited Gains for Additional Households
The DWP assessment further indicates that an additional 20,000 families will only experience partial income increases from April. These households will see their incomes raised only to the benefit cap level, meaning they will not receive the full financial boost intended by the removal of the two-child limit.
Chancellor Rachel Reeves announced the end to the controversial two-child limit at last year's Labour Budget. According to the Office for Budget Responsibility's fiscal outlook, the move is expected to increase benefits for 560,000 families by an average of £5,310 annually. The government estimates this change will reduce the number of children living in poverty by 550,000 by 2030.
Benefit Cap Remains Frozen
Meanwhile, the benefit cap will remain frozen throughout the 2026/27 financial year, marking the fourth consecutive year it has not risen in line with inflation. The level was last increased in 2023, currently standing at £1,835 per month for most couples or claimants with children, equivalent to £22,020 annually. In Greater London, the cap is set higher at £2,110.25 monthly or £25,323 per year.
While there is a statutory obligation for the government to review the cap every five years – with the next review scheduled for November 2027 – ministers retain the authority to make decisions about the policy at any time.
Charity Warns of Continuing Child Poverty
The official assessment follows recent warnings from the Joseph Rowntree Foundation that, without additional government action, 4.2 million children will still be growing up in poverty by 2029 despite the removal of the two-child benefit limit.
Iain Porter, senior policy adviser at the Joseph Rowntree Foundation, commented: "It's good news that the government has begun the process of reducing child poverty and the removal of the 2-child-limit for Universal Credit is undoubtedly a step in the right direction. But on its own it's not enough. Our analysis shows child poverty will fall sharply in April, but then stall. By the end of the parliament there will still be around 4 million children in poverty – unless the government takes additional steps."
Porter emphasised that "an immediate and obvious step is to address the damage done by the benefit cap, which leaves families in hardship." The policy expert reiterated the charity's call to establish a protected minimum floor within Universal Credit to limit how much payments can be reduced by debt deductions or the benefit cap.
Government Response and Strategy
The foundation has additionally urged the government to consider implementing an 'essentials guarantee' to ensure benefit payment levels are always sufficient for people to afford basic living costs.
A government spokesperson responded: "Our Child Poverty Strategy will lift 550,000 children out of poverty by 2030 – the biggest reduction in a single parliament. Scrapping the two-child limit is just one of the ways we're helping to lift children out of poverty, alongside measures including extending Free School Meals, boosting the national living wage, cutting energy bills by £150 and launching our £1 billion Crisis and Resilience Fund to support families in need."
The complex interaction between the removal of the two-child limit and the continuing benefit cap highlights the challenges facing policymakers as they attempt to reduce child poverty through targeted welfare reforms.
