Carer's Allowance cliff edge to end – watch Martin Lewis' instant reaction
What MoneySavingExpert.com (MSE) founder Martin Lewis has previously called the "awful" and "nonsense" Carers Allowance cliff edge is to be abolished, the Government has announced (on Monday 26 October). Currently, unpaid carers lose their entitlement to the benefit when they earn just a penny over the threshold. But this is set to change from the 2030/31 financial year.
Watch: Martin Lewis' instant reaction to the Carer's Allowance announcement
Watch Martin explain the changes or, if you prefer, read on for more information.
Read the full transcript
Martin Lewis: "This is my instant reaction to the news that the Carer's Allowance cliff-edge for England and Wales – I'm still checking out Northern Ireland – is to end. Hurrah! That is very good news. It was one of the things on my list when I met the Chancellor a couple of months ago. Unfortunately though, it isn't going to happen straight away.
"Let me take you through this in detail. It's important to understand how it works. Currently, an army of people who are saving the state money by unpaid caring 35 hours a week or more, that's a lot, for an eligible person, get a payment of £86.45 a week. Now that isn't very much, but these are people on very low incomes.
"And we know that because if you earn over £204 a week right now after tax, National Insurance and a few other complexities, you lose it all. And literally it works you earn a penny more, it's all gone. That's why it is a cliff-edge.
"It is unjust. It shouldn't work like that. And the biggest nightmare from this is many people unknowingly were overpaid due to say, they did an extra hour's work in a week, or their wages went up by a couple of pence, or the minimum wage went up.
"They kept working and they kept getting the Carer's Allowance because they didn't say they didn't get it anymore. They'd been overpaid. And suddenly the state went, we want thousands of pounds back. And these are people earning £204 a week plus some Carer's Allowance on top, there was no way they can afford it. It's been a nightmare. The new system, I'm afraid, will only come in in 2030/31.
"Sadly, I've been told that the reason for the delay is because the whole IT system needs fixing to avoid the overpayment issue.
"Here's how the new system is going to work. I’m basing it on current numbers. Hopefully the thresholds will go up anyway, but we'll do it on current numbers to make it simple. You get the full amount up to £204 of earnings a week.
"Then for each £1 you earn over that, you lose £1 of allowance. So your earnings go up. The allowance goes down, so effectively you earn the same. What it means in practice is if you earn over £204, but less than £290.45 a week, when you add your earnings and your Carer's Allowance, you will always earn £290.45 a week.
"So that does mean if you're within those thresholds, you're not better off from work at that point. But unlike now, you're not losing money because right now, if you're between £204 and £290.45 a week, you actually get less. You actually get less because the Carer's Allowance is gone and the amount of extra earnings you had doesn't make up for it.
"So while this is not perfect, it is a big step forward. It reduces the disincentive to work because people can try and earn a bit more knowing they're not going to be worse off if they do so. And hopefully some people then break through the £290.45 a week barrier. If you think you're eligible, the Carer’s Allowance is still available right now, but do remember that cliff-edge, unfortunately, is still going to be in place.
"Just a little nerdy technical update at the end. As soon as I recorded that, I realised I hadn't incorporated the fact that the £86.45 a week Carer's Allowance is actually taxable. So while it's still correct that for every £1 above £204 you earn, you lose £1 of Carer's Allowance, but you're always at effectively £290.45 a week.
"While the £204 has already had tax and National Insurance taken off it, I didn't incorporate in my numbers. The £86.45 has to have tax taken off it, which at that level of earnings would be about a tenner. So you wouldn't get £290.45 a week. You probably get somewhere around £280 a week take-home after it all. It doesn't really change any of the other explanation. I just wanted to try and be a bit more accurate."
The problem with the Carer's Allowance cliff edge
Currently, unpaid carers who provide care for at least 35 hours a week to a person on a qualifying benefit (for example, the daily living component of Personal Independence Payment, or the middle or highest care rate of Disability Living Allowance) receive a Carer's Allowance payment.
This payment is £86.45 a week in England, Northern Ireland and Wales, and up to £98.15 a week in Scotland.
However, earn just 1p over the UK-wide weekly earnings limit of £204, and you'll lose the ENTIRE benefit. This limit applies to income AFTER deducting tax, National Insurance, and other expenses (such as 50% of your pension contributions or specialist equipment).
Due to flaws with the current system, this has seen carers often still paid the allowance for months, or even years. Then, even though they may have only earned a pound or two more, they're later asked for unaffordable £100s or £1,000s back. One carer we spoke to told us she "felt like a criminal" after being told to repay £20,000.
A review into these overpayments was launched by the Government earlier this year, with debts set to be potentially reduced, cancelled or refunded for around 25,000 unpaid carers.
How the cliff edge will change in future
Under the Government's plans, the cliff-edge will change to a taper. In reality, this means unpaid carers will lose £1 from their benefit for every £1 they earn over the threshold.
For example, earn £250 a week, and you'd lose £46 of the benefit, taking your Carer's Allowance to £40.45 a week. Once you hit weekly earnings of £290.45, the taper would effectively wipe out any benefit from receiving the Allowance. (This example excludes tax and doesn't factor in benefit rates changing – Carer's Allowance usually rises in line with inflation each April.)
A taper (as is currently the case with Universal Credit) is something MSE has been calling for as this would allow carers some breathing room – especially where income is not fixed week-to-week.
The changes are due to take effect from the 2030/31 financial year to give the Government time to put in place a new system to automatically deal with earnings information. We're checking if this would apply UK-wide and we'll update this news story when we know more.
A taper is something we've long called for
Martin first put the problem of the Carer's Allowance cliff-edge to then-Chancellor Jeremy Hunt in 2024. Since then, Martin's called on successive chancellors, including Rachel Reeves and John Healey, as well as on other Government officials to look at ending the cliff-edge.
The MSE founder has previously described the way the cliff-edge is designed as "broken, old-fashioned, unjust and in need of urgent change".
Commenting on today's announcement, Emily Holzhausen, director of policy at charity Carers UK, said: "Our evidence from unpaid carers found many having to give up part-time paid work altogether or turning work down because they cannot risk going over the limit and losing 100% of their Carer's Allowance.
"Once introduced, it [the taper] should also help to significantly reduce the number of overpayments related to earnings, which carers have found devastating financially and emotionally."
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