Healey to Replace Carer's Allowance Cliff-Edge With Digital Taper

Chancellor John Healey will announce a digital taper system for carer’s allowance in Wednesday’s budget, ending the weekly earnings cliff-edge that punished unpaid carers for earning even a penny over the limit. Under the current rule, earning more than £204 per week results in the loss of the entire £86.45 allowance for that week. The new system will instead remove only one pound of allowance for every extra pound earned above the threshold.

The cliff-edge rule created a financial trap where carers who exceeded the limit by small amounts accumulated large debts. A carer earning just 52p over the limit over a year could be asked to repay £4,495.40. The Department for Work and Pensions was aware of breaches but did not warn carers, claiming the responsibility lay with the recipients. This led to overpayment debts typically ranging from £2,000 to £5,000, with some cases reaching £20,000.

An independent review led by disability rights expert Liz Sayce found that approximately 180,000 carers ran up debts totaling £300 million between 2019 and 2025. The review identified systemic failures in the DWP’s administration, including cases where carers were penalized because the national minimum wage rose faster than the earnings limit. In one instance, a carer was charged a £2,000 penalty for total above-limit earnings of just £5. Some carers were even convicted of fraud after welfare officials used legislation designed for organized crime to recover funds.

Healey described the current system as working against carers, stating that doing an extra shift or receiving a small pay rise should not leave someone worse off. The new taper system will not be introduced before the end of the decade due to the technical requirements of building the new digital infrastructure. Carers UK noted that the cliff-edge has caused many carers to give up paid work or refuse promotions to avoid the risk of losing their benefit.

The change is part of a series of measures announced ahead of the budget. Healey also plans to 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 above that. The Treasury estimates this will benefit about 3 million people who use their own vehicles for work. Additionally, the budget will extend parental support worth up to £194 a week to an extra 150,000 new parents, including self-employed fathers.

Other announcements include the removal of import tariffs on more than 100 products, such as baked beans and chocolate, and an increase in the number of Post Office drop boxes to 1,000. Healey is also expected to raise the minimum wage by about 4% to approximately £13.20 an hour. While the government previously promised to raise the youth rate to the full level, ministers have opted for a similar percentage increase for workers under 21 to address concerns about youth unemployment.

Work and Pensions Secretary Pat McFadden said the government listened to carers’ concerns about being financially worse off for taking on extra hours. Kirsty McHugh, chief executive of Carers Trust, called the reform long-overdue but urged the government to use it as a starting point for wider changes to a benefit system she described as stuck in the 1970s. Emily Holzhausen, director of policy at Carers UK, said the taper should give families more choice about working while still providing care.