Chancellor Rachel Reeves signalled a preference to end limits on benefit support by family size, telling BBC Radio 5 Live on 10 November that children in larger families should not be “penalised” and that ministers will act on child poverty. The comments come ahead of the Autumn Budget set for Wednesday 26 November 2025.
The two-child limit, introduced in April 2017, restricts Universal Credit (UC) and (until closure) Child Tax Credit from paying a child element for a third or subsequent child born after 6 April 2017, subject to defined exceptions. In April 2025, 469,780 UC households were affected, with 1,665,540 children living in those households; 59% were in work and 26,300 households had at least one exception.
This policy is distinct from Child Benefit. Child Benefit remains universal but is clawed back via the High Income Child Benefit Charge: from 6 April 2024 the charge withdraws support between £60,000 and £80,000 of adjusted net income, with full withdrawal at £80,000. The benefit and the UC child element therefore operate under separate rules.
Options previously briefed by the Treasury and reported in the press have included tapering support by child, moving to a three- or four-child limit, or restricting changes to some claimant groups. Reeves’s remarks instead pointed away from limiting support by family size, indicating a potential full removal of the cap.
Latest modelling from the Institute for Fiscal Studies indicates that scrapping the two‑child limit alone would, in the long run, lift around 540,000 children above the absolute poverty line at an annual cost of about £2.5bn. If the household benefit cap were also removed, the poverty impact could rise to around 620,000 children at a cost of roughly £3.3bn, with some gains otherwise reduced by the cap.
Other estimates show the range of possible impacts. Child Poverty Action Group calculates an immediate effect of lifting about 350,000 children from poverty in 2025/26 at a cost of roughly £2bn, while Resolution Foundation suggests the eventual cost of full abolition could reach around £3.6bn as coverage expands, with roughly 490,000 children lifted from poverty if implemented today.
The politics and financing remain tight. Labour’s 2024 manifesto pledged not to raise National Insurance, or the basic, higher or additional rates of Income Tax, or VAT. Reeves has argued that adhering strictly to those pledges would imply “deep cuts in capital spending”, and the Government has already raised employer National Insurance from April 2025. Ministers have also left open the possibility of extending the freeze to income tax thresholds beyond April 2028.
The Budget is scheduled for 26 November and the Chancellor has framed her priorities as protecting the NHS, reducing debt and improving the cost of living. The June Spending Review increased day‑to‑day NHS funding by around 3% a year over the review period, implying materially higher recurrent spending pressures that any welfare changes must be set against.
Policy design will determine real‑world effects. DWP data show 38,200 households affected by the two‑child limit are also capped by the separate household benefit cap, limiting what a repeal of the limit alone would deliver in those cases. Abolition of the two‑child limit without changes to the benefit cap would therefore boost incomes most where households are not already capped.
Party positions are diverging. Reform UK has pledged to scrap the two‑child cap, while Conservative leader Kemi Badenoch has said a future Conservative government would reinstate it if removed. The SNP has sought to force Commons votes on the issue, maintaining pressure on ministers to set out a definitive position at the Budget.
For councils, advice agencies and welfare teams, any full repeal would increase UC child‑element entitlements for affected families from the implementation date, subject to the separate household cap. Operational detail will sit in amending regulations and guidance; final policy and costings are due in the 26 November Budget alongside the OBR forecast.