Chancellor Healey to replace carer benefit cliff-edge with 1-for-1 taper

£300m. That is the total value of overpayment debts accumulated by unpaid carers between 2019 and 2025, according to a government-commissioned review. Chancellor John Healey is to announce the abolition of the administrative rule that generated this debt in his budget on Wednesday.

The current system imposes a binary penalty. If a carer earns more than the weekly limit of £204, they lose the entire £86.45 allowance for that week. A carer earning one penny over the limit for a year breaches the threshold by 52p but faces a repayment demand of £4,495.40.

Healey will introduce a digital taper system to replace this cliff-edge. Under the new rules, carers will lose only £1 of their allowance for every additional £1 earned above the limit. This change ensures that working extra hours or receiving a pay raise does not leave carers financially worse off.

The Department for Work and Pensions (DWP) knew when carers breached earnings limits but did not issue warnings. Officials relied on carers to self-report changes, often leaving them unaware of the breach for years. Debts typically ranged from £2,000 to £5,000, with some cases reaching £20,000.

Welfare officials used legislation designed to recover funds from drug dealers and organised crime bosses to chase these debts. Some unpaid carers were convicted of fraud as a result of the process. An independent review by disability rights expert Liz Sayce found that systemic injustices caused depression and hardship on a large scale.

The review cited one case where a carer was penalised because the national minimum wage rose faster than the earnings limit. Her hours remained unchanged, but she was 15p over the limit weekly. Months later, she was told she owed £2,000 for above-limit earnings that totaled just £5.

Healey called the current system a setup that worked against carers. "That means doing an extra shift or getting a small pay rise can actually leave someone worse off. That cannot be right," he told the Guardian. He added that the taper will give carers the freedom to earn more without losing all support.

Campaigners welcomed the reform but noted a delay in implementation. The technical demands of building the new digital system mean the taper will not be introduced before the end of the decade. Carers UK said the cliff-edge currently causes many carers to refuse promotions, overtime, or bonuses to avoid the risk of debt.

The budget includes four other measures described as everyday fixes. The government will make higher tax-free mileage rates permanent, setting the rate at 55p per mile for the first 10,000 business miles and 35p per mile thereafter. This benefits approximately 3 million employees and self-employed workers who use their own vehicles.

Healey will also raise the minimum wage by about 4% to approximately £13.20 an hour. Youth rates will rise by a similar margin, a decision made after ministers expressed concern that higher wages for under-21s were dissuading companies from hiring young employees. The budget will also remove import tariffs on more than 100 products, including baked beans, chocolate, and gherkins.