Carers' allowance: £300 million in debts wiped out by new taper rule

Between 2019 and 2025, unpaid carers accumulated $300 million in overpayment debts under a benefit rule that penalized them for earning just one penny over the weekly limit. Chancellor John Healey will announce the end of this system in his budget on Wednesday, replacing the cliff-edge with a digital taper.

Under the current rules, a carer earning more than the $204 weekly threshold forfeits their entire $86.45 allowance payment. A person who exceeded the limit by a single penny for a year would owe $4,495.40 in back payments. The Department for Work and Pensions knew when carers breached these limits but did not warn them, leaving many unaware of their debt for years.

The new tapered system changes the calculation so that only $1 of allowance is removed for every additional $1 earned above the limit. This ensures that working extra hours or receiving a pay rise does not leave a carer with less total income than if they had done neither.

An independent review by disability rights expert Liz Sayce found that 180,000 carers suffered this financial penalty. The review cited cases where carers were fined thousands of dollars for minor breaches, with one individual penalized by $2,000 after earning just $5 over the limit due to a minimum wage increase. The review noted that carers often faced depression and hardship as a result of these systemic failures.

Healey described the previous system as one where doing an extra shift could leave someone worse off. He stated that the new taper gives carers the freedom to work a little more without suddenly losing all their support. The change is part of five "everyday fixes" announced ahead of the budget, which also includes permanent higher tax-free mileage rates for roughly 3 million workers.

Carers UK director of policy Emily Holzhausen said the taper allows families more choice about working and caring. She noted that many carers previously avoided promotions or overtime to avoid the risk of losing their benefit. The new digital system will not be fully operational before the end of the decade, but the policy change takes effect with the budget announcement.

The budget also raises the national minimum wage by about 4 percent to roughly $13.20 an hour. Ministers are removing import tariffs on more than 100 products, including baked beans and chocolate, and adding hundreds of Post Office drop boxes to reach a total of 1,000 locations.