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With the start of the new financial year, a range of benefits and the state pension have seen increases, including additional support for larger families receiving universal credit. A significant development has been the removal of the two-child benefit cap, which will now benefit approximately 480,000 families with three or more children, who are expected to gain an average of £4,100 annually.
This policy change has been welcomed by many. One mother described the increase as a “massive help” amid the rising cost of living, while various charities have labeled it a “gamechanger.” However, some critics argue that the government could allocate these funds more effectively elsewhere. The two-child limit on universal credit and tax credits had been in place for nearly a decade, a measure that reportedly saved the Treasury around £3.6 billion each year.
Tracey Morris, a single mother of five from Huddersfield, is among those benefiting from this adjustment. Her youngest children, Luna and Harlie, were born following the introduction of the cap. Morris, who works full-time for the local council and supplements her income with occasional shifts at a pub, shared the challenges of managing finances. “I’ve always had to be careful what I spend and how I spend it. The cost of living got so high, it’s a struggle,” she explained. She also relies on a local food pantry, The Bread and Butter Thing, to help cover basic groceries and emphasized how stressful money worries have been: “It’s so draining. I’m exhausted worrying about money all the time. As a mum, sometimes you feel like you’re failing, but I’m not failing, it’s just the situation, unfortunately, that we are in.”
Alongside the boost for families with more children, the universal credit child element will automatically increase from May for those who qualify, with no need to apply. Meanwhile, about three million households will see an average increase of £120 this year due to other rises in the universal credit basic allowance. However, the health element of universal credit, which supports claimants with disabilities that limit their work capacity, will be reduced by half for new applicants, although the 2.8 million existing recipients will remain unaffected. Disability benefits, including personal independence payment, attendance allowance, disability living allowance, and carer’s allowance, have all increased by 3.8%, aligning with inflation.
Regarding pensions, both the new flat-rate state pension and the old basic state pension have been increased. The flat-rate pension, for those reaching state pension age after April 2016, is now £241.30 per week (£12,547.60 annually), rising by £574.60. The older basic state pension, for persons who qualified before April 2016, has increased by £439.40 to £184.90 weekly (£9,614.80 yearly). To qualify for the full state pension, individuals generally need 35 years of contributions, but the pension age is gradually rising from 66 to 67 over the next two years. Additional fiscal changes have come into effect, such as updates to inheritance tax on farms, dividend tax, venture capital trust relief, and homeworking tax relief. Notably, income tax thresholds remain frozen, a policy initially set by the Conservatives until 2028-29 and later extended by Labour until 2031. This freeze means that as wages rise, more people are liable for higher taxes, with economists often referring to this approach as a “stealth tax” since it increases tax revenue without raising rates. The related tax calculations apply to employees in England, Wales, and Northern Ireland, while Scotland uses different tax bands, and self-employed individuals face distinct tax rules
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