What is the two-child benefit cap and when will it be lifted?

Getty Images

The two-child benefit cap will be lifted from April, the Chancellor has announced in the Budget.

The limit means that many low-income families do not currently receive further benefits after having a third or subsequent child.

The policy, introduced by Conservative chancellor George Osborne, means parents can only claim universal credit or tax credits for their first two children.

It applies to third or subsequent children born after 6 April 2017.

A total of 1.6 million children are in larger families which cannot claim these means-tested benefits as a result.

If the cap had not been introduced, affected families could have received an average of £4,400 in benefit entitlements a year, according to the Institute for Fiscal Studies (IFS) think tank. It estimates that the policy has saved the Treasury about £3.6bn a year.

Ahead of the Budget, the chancellor told the BBC it was not right that children in bigger families were "penalised" through "no fault of their own".

She has now announced that the cap will be scrapped altogether from April 2026.

In 2029-30 an estimated 560,000 families will see an increase in universal credit averaging £5,310 per year.

The government says this measure will lift 450,000 children out of poverty.

Removing the cap will cost £2.3bn in 2026-27 and £3bn in 2029-30, according to the Office for Budget Responsibility.

If you have, for example, four children born before 6 April 2017, then you will still receive additional payments. That relates to children aged under 16, or young people aged under 20 who are in full-time education or training.

If a parent, or parents, have one child, and the next are twins or triplets, then a claim can be made for all these children.

Claims can also be made if children are born after rape, or from a coercive relationship. Payments can also go to children who are adopted, in your care rather than local authority care, or are a child of your child.

More than 100 charities had written to the chancellor to call for the two-child limit to be scrapped.

A host of backbench Labour MPs also wanted the chancellor to scrap it, arguing that it would bring hundreds of thousands of children out of poverty.

The Conservatives supported the cap, saying it made the system fairer, and meant parents on benefits face the same financial choices as parents who fund themselves solely through work.

Correct. There is often a misconception that the two-child limit affects the payment of child benefit, because it is called the two-child benefit cap.

So, take a breath between "two-child" and "benefit".

This policy is specifically directed at universal credit and tax credits, not child benefit.