The government announced a significant change to the benefits system for unpaid carers in its budget unveiled yesterday, aiming to ease financial penalties faced by those who balance paid work with care responsibilities.

Currently, individuals who provide unpaid care for at least 35 hours a week to an elderly or disabled person may claim a carer’s allowance of up to £86.45 per week, provided they earn less than £204 weekly—roughly 16 hours at minimum wage. However, the allowance is withdrawn entirely if a claimant earns even one penny over this income threshold, a policy that critics have described as creating a “cliff-edge” penalizing carers for working additional hours. This results in the loss of a benefit valued at approximately £4,495 annually.

John Healey, the chancellor, announced a new tapered approach to the carer’s allowance eligibility criteria, which will be introduced in 2030. Under the revised system, the allowance will gradually decline as earnings exceed the current threshold, rather than stopping abruptly. The government estimates the change will benefit around 48,000 carers in England and Wales. The delayed implementation is attributed to the need for updated IT infrastructure to manage the new system.

Financially, the reform will not impose costs on the Treasury until 2030, when it is projected to cost £40 million, rising to £80 million in the following fiscal year.

The Department for Work and Pensions (DWP) has faced criticism in the past for failing to adequately inform carers when they have exceeded the earnings limit, leading to some individuals incurring significant debts unknowingly over extended periods.

Catherine Foot, a director at Standard Life, welcomed the reform, highlighting its potential to alleviate financial stress and uncertainty for unpaid carers. She emphasized, however, that more substantial support is still necessary to address the broader challenges unpaid carers face, including high rates of employment loss. Nearly 1,500 people daily leave the workforce to provide care, often increasing their financial vulnerability in retirement. Foot also underscored the importance of reforms to the social care system, noting that affordable, accessible, and reliable care services could prevent many carers from being forced to give up work.

In addition to changes to the carer’s allowance, the budget also increased the qualifying care relief scheme, which offers tax relief for carers providing free care for children or adults. The relief cap, currently set at £10,000, will be indexed annually starting April 2027.

Healey confirmed that savings generated from adjustments to the state pension triple lock—specifically from 2030 when the pension will increase by inflation or 2.5% rather than the highest of inflation, earnings growth, or 2.5%—will be allocated to funding a National Care Service in England.