The Government has confirmed plans to end the controversial Carers’ Allowance earnings cliff edge.
In a move that Money Saving Expert founder Martin Lewis said was “very good news” the Chancellor announced plans to replace the cliff edge with a taper, reducing Carers’ Allowance by £1 for every £1 earned above the weekly threshold.
In an immediate reaction to the announcement, Martin Lewis said: “Hurrah! That is very good news.”
But Lewis stressed that the change will not happen straight away, with the delay reportedly linked to the need to overhaul the IT system to prevent overpayments.
Martin Lewis explains why Carers’ Allowance change matters
Carers’ Allowance is paid to eligible people who provide at least 35 hours of unpaid care a week.
Lewis said the current weekly payment is £86.45, but people can lose the entire amount if their earnings exceed the current £204-a-week limit, after tax and National Insurance and subject to the detailed eligibility rules.
He said: “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.”
The rules have also caused problems for carers who unknowingly continue receiving payments after their earnings rise above the limit.
Lewis explained that this can happen when someone works an extra hour, receives a small pay rise or is affected by an increase in the minimum wage.
If they continue receiving Carers’ Allowance when they are no longer eligible, they can later be told to repay thousands of pounds.
Lewis said: “There was no way they could afford it. It’s been a nightmare.”
When will the Carers’ Allowance changes happen?
Despite welcoming the announcement, Lewis warned that the new system is not expected to be introduced until 2030/31.
He said he had been told the delay was because the IT system needed to be fixed to avoid the overpayment problems that have affected carers.
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Under the planned system, people would keep the full benefit while earning up to the current £204-a-week threshold. Above that, their Carers’ Allowance would be reduced by £1 for every additional £1 earned.
Using today's figures, Lewis explained that someone earning between £204 and £290.45 a week could end up with the same combined gross income from earnings and Carers’ Allowance.
Lewis said: “While this is not perfect, it is a big step forward.”
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