Martin Lewis: Confused by the difference between the 'two-child benefit cap' and limits on Child Benefit? An explainer

Here's a full transcript of Martin's benefits explainer 

Martin: "Are you confused about the difference between the Child Benefit rules, the 'two-child benefit limit' and the benefit cap? I wouldn't be surprised if you are, because it has been much confused and mis-explained in the media, during the current political debate, who often convolute all three into one thing called the 'two-child benefit cap'. It doesn't really exist.

"I'm Martin Lewis from MoneySavingExpert.com, and in this video I want to try and clear it up for you – though I have to start by saying I'm going to look at [the] big picture here. The benefits system is very complicated. There are a lot of ifs and buts; I won't be doing them all. It's just to try and give you the broad-brush concept."

How Child Benefit works

"So, the first thing is Child Benefit, a universal payment made for EVERY child you have. You get £25.60 a week for the first child; £16.95 a week for each subsequent child. So, to be plain, you've got 10 kids: that's one lot of £25.60 a week and nine lots of £16.95 a week, though that is subject to the benefit cap, [which] I will talk about later.

"Plus, there is another restriction on Child Benefit that depends on what the highest-earning parent earns. So, once they earn £60,000 or more, then the Child Benefit is clawed back through the tax system via what's called the high income Child Benefit charge. If their income is over £80,000, then that charge is the same as the Child Benefit – so, effectively, you do not get any Child Benefit.

"The way it's structured is unfair on single parents, single-earner families and dominant-earner families. And it's something I'm campaigning on separately. But it's not what I'm going to talk about today."

The two-child limit on Universal Credit and Tax Credits

"Now, number two is the two-child limit. This is the one that is being discussed in the media. This is the one there's all the political issues about. It should accurately be called the 'two-child limit for Universal Credit or Tax Credits'.

"This one applies to the benefits that people who have low incomes, whether they're working or not working, get. That's what this is about.

"And in simple terms, it means if you have more than two children, then you won't get any additional benefit for the costs that they are incurring you (on Universal Credit and Tax Credits).

"There are exemptions to this. If your child was born before 6 April 2017 when it came in, then that doesn't count. And there are other things out there. For example, if you've had a multiple birth, [say] triplets, then there are exemptions in the rules for that. But in general terms: more than two kids, you won't get extra benefits."

The benefit cap

"The third one is the benefits cap. In simple terms, there is a maximum amount you can get on benefits. Now, there are rules here, like a nine-month grace period, which means some can get more. But in general terms it's a maximum amount.

"Now, crucially, this includes Universal Credit and Tax Credits, but it also includes Child Benefit and a whole host of other benefits. So do check online. There's a full list on Gov.uk of what those benefits that are included are.

"Now, the cap for families, couples and single parents is £1,835 a month. For single adults, it's £1,229.42 a month, unless you live in Greater London, where the caps are all higher.

"So there you go. You've got Child Benefit rules, the two-child limit for Universal Credit and Tax Credits, and a benefits cap. That is how the system works, although there are lots of ifs and buts. I hope that helped clear it up a bit."