UK to Abolish Carer's Allowance 'Cliff Edge': Earning a Penny Over the Weekly Limit Will No Longer Cost the Whole Payment

The controversial 'cliff-edge' rule in Britain's carer's allowance is to be abolished. The chancellor, John Healey, is to announce a new digital taper system for the allowance in Wednesday's budget, effectively ending the practice under which earning slightly over the weekly limit costs a carer the entire week's payment.

Under the current rule, if a carer earns even a penny more than the weekly earnings limit — currently £204 — they forfeit their entire week's carer's allowance payment, currently £86.45. A carer who earned a penny over the limit for a year would breach it by 52p but would be asked to repay £4,495.40.

A Guardian investigation revealed that hundreds of thousands of carers have, through no fault of their own, run up life-changing debts in recent years after overstepping the weekly thresholds by just a few pence. Those debts were chased down by welfare officials using legislation designed to recover funds from drug dealers and organised crime bosses, and some unpaid carers were convicted of fraud as a result.

The Department for Work and Pensions (DWP) was aware when carers breached the earnings limits, but refused to warn them, insisting the onus was on carers to report any changes. Thousands of carers spent long periods unaware of the breach, in some cases for years, resulting in overpayment debts typically of £2,000 to £5,000 but in some cases as much as £20,000.

Under the new tapered system, only £1 of carer's allowance will be removed for every additional £1 earned above the earnings limit, meaning carers are no longer left financially worse off for working additional hours or receiving a pay rise.

The Guardian's reporting triggered a government-commissioned independent review of carer's allowance overpayments by disability rights expert Liz Sayce, published last year. It found that about 180,000 carers ran up overpayment debts amounting to £300m between 2019 and 2025, and that unpaid carers suffered depression and hardship on a huge scale after falling foul of systemic injustices including the cliff edge.

In one case highlighted by the review, a carer was penalised when the national minimum wage increased at a faster rate than the earnings limit, putting her 15p a week above the limit even though her hours had not changed. Months later, she was told she had incurred a £2,000 penalty for above-limit earnings totalling just £5.

Healey told the Guardian the carer's allowance system had worked against carers: doing an extra shift or getting a small pay rise could actually leave someone worse off, which he said cannot be right. At Wednesday's budget the cliff edge will end and the allowance will instead taper as earnings increase, giving carers the freedom to work and earn a little more without suddenly losing all their support.

Carers UK welcomed the decision as a long-overdue reform, although there was disappointment that the technical demands of building a new digital system to run the taper mean it will not be introduced before the end of the decade. The organisation says the cliff edge plays havoc with carers' attempts to work part-time around their minimum 35 hours a week of caring duties, with many giving up paid work or refusing promotions, overtime or bonuses because of the risks.

The announcement is one of five 'everyday fixes' announced by Healey ahead of his budget. They also include making higher tax-free mileage rates permanent — the 55p per mile rate for the first 10,000 business miles locked in, and the rate above 10,000 miles increased to 35p per mile — a move the Treasury said would benefit about three million employees and self-employed people who use their own vehicle for work. Treasury insiders have warned the budget will be low-key, with the chancellor's room for manoeuvre severely constrained by a tight fiscal backdrop resulting from global events including the conflict in Iran.