Healey to replace carer allowance cliff-edge with gradual taper in Wednesday's budget

Chancellor John Healey will abolish the carer’s allowance cliff-edge in the budget announcement on Wednesday, replacing the binary benefit cut with a gradual taper. Under the current system, an unpaid carer who earns one penny above the weekly limit of £204 loses the entire week’s allowance of £86.45. The new digital taper will reduce the allowance by only £1 for every £1 earned over the limit, ensuring carers are not financially penalized for working extra hours or receiving pay raises.

The change addresses a debt burden that has accumulated over the past six years. An independent review commissioned by the government found that approximately 180,000 carers incurred overpayment debts totaling £300 million between 2019 and 2025. Typical debts ranged from £2,000 to £5,000, though some carers faced liabilities as high as £20,000. These debts resulted from the Department for Work and Pensions refusing to warn carers when they breached earnings thresholds, placing the responsibility for reporting changes entirely on the individuals.

Healey stated that the existing system worked against carers, leaving some worse off for taking on additional shifts. "That means doing an extra shift or getting a small pay rise can actually leave someone worse off. That cannot be right," he told the Guardian. "So at this budget on Wednesday, we’re ending that cliff-edge. Carer’s allowance will instead taper as earnings increase, giving carers the freedom to work a little more and earn a little more without suddenly losing all their support."

The review cited by the government identified systemic failures that contributed to the debt crisis. One case highlighted a carer who was penalized because the national minimum wage increased faster than the earnings limit. Her pay rose by 15p a week without a change in hours, leading to a £2,000 penalty for earnings that exceeded the limit by a total of just £5 over several months. The review concluded that the outdated design of the benefit and administrative failures by the DWP were the primary drivers of the hardship.

Work and Pensions Secretary Pat McFadden said the government intends to end the cliff-edge after listening to carers' concerns. "We have listened to [carers’] concerns about the cliff-edge built into the system which leaves them financially worse off for taking on a few more hours, or getting a modest pay rise, and intend to bring that to an end," McFadden said. Campaigners welcomed the move as a long-overdue reform, though they noted the digital infrastructure required for the taper means the new system will not be operational before the end of the decade.

The carer’s allowance change is one of five "everyday fixes" Healey plans to announce. The budget will also make higher tax-free mileage rates permanent, setting the rate at 55p per mile for the first 10,000 business miles and 35p per mile for subsequent miles. The Treasury estimated this measure would benefit approximately 3 million employees and self-employed individuals who use personal vehicles for work.

Other measures include expanding parental support to an additional 150,000 new parents, including self-employed fathers and partners. This support will be worth up to £194 a week. Ministers are also removing import tariffs on more than 100 products, such as baked beans and chocolate, and increasing the number of Post Office drop boxes to 1,000 to improve parcel convenience.

Healey is expected to raise the national minimum wage by about 4% to approximately £13.20 an hour. The youth rate for workers under 21 will also see a similar increase. This approach departs from previous plans to equalize the youth rate with the full rate, a shift driven by government concerns that higher costs might discourage companies from hiring young employees.