Martin Lewis has welcomed a major Budget pre-announcement affecting unpaid carers, declaring “hurrah” as the Government confirmed plans to end the controversial Carers’ Allowance earnings cliff edge.
The Money Saving Expert founder said the move was “very good news” and revealed it had been among the issues he raised when he met Chancellor John Healey a couple of months ago.
However, he warned that carers may have to wait until 2030/31 for the new system to come into effect, meaning the current rules will remain in place for several years.
In an immediate reaction to the announcement, Lewis said: “Hurrah! That is very good news.”
In a video post on his social media, he explained that the current system can leave unpaid carers facing the loss of their entire weekly benefit if their earnings exceed the limit by even a penny.
The Government plans to replace the cliff edge with a taper, reducing Carers’ Allowance by £1 for every £1 earned above the weekly threshold.
But Lewis stressed that the change will not happen straight away, with the delay reportedly linked to the need to overhaul the IT system to prevent overpayments.
Martin Lewis explains why Carers’ Allowance change matters
Carers’ Allowance is paid to eligible people who provide at least 35 hours of unpaid care a week.
Lewis said the current weekly payment is £86.45, but people can lose the entire amount if their earnings exceed the current £204-a-week limit, after tax and National Insurance and subject to the detailed eligibility rules.
He said: “You earn a penny more; it’s all gone. That’s why it is a cliff edge. It is unjust. It shouldn’t work like that.”
The rules have also caused problems for carers who unknowingly continue receiving payments after their earnings rise above the limit.
Lewis explained that this can happen when someone works an extra hour, receives a small pay rise or is affected by an increase in the minimum wage.
If they continue receiving Carers’ Allowance when they are no longer eligible, they can later be told to repay thousands of pounds.
Lewis said: “There was no way they could afford it. It’s been a nightmare.”
When will the Carers’ Allowance changes happen?
Despite welcoming the announcement, Lewis warned that the new system is not expected to be introduced until 2030/31.
He said he had been told the delay was because the IT system needed to be fixed to avoid the overpayment problems that have affected carers.
Under the planned system, people would keep the full benefit while earning up to the current £204-a-week threshold. Above that, their Carers’ Allowance would be reduced by £1 for every additional £1 earned.
Using today's figures, Lewis explained that someone earning between £204 and £290.45 a week could end up with the same combined gross income from earnings and Carers’ Allowance.
He cautioned that the calculation needs to account for the fact that Carers’ Allowance is taxable, meaning the take-home amount would be lower.
While the taper would not necessarily make people better off for every extra hour worked, it would remove the sudden loss of the entire benefit and reduce the risk of being worse off after earning slightly more.
Lewis said: “While this is not perfect, it is a big step forward.”
He added that it could reduce the disincentive to work by allowing carers to earn more without immediately losing their whole benefit.
What else has been announced ahead of the Budget?
The Carers’ Allowance change is one of several measures unveiled ahead of Wednesday’s Budget.
Other announcements include:
- Mileage allowance: The 55p-a-mile tax-free rate for the first 10,000 business miles is to be made permanent, while the rate above that threshold is set to rise from 25p to 35p.
- Parental pay: Support is to be extended to self-employed fathers and other parents who have previously missed out.
- Food tariffs: Tariffs on more than 100 products, including chocolate, baked beans and gherkins, are set to be removed.
- Post Office parcels: Hundreds of additional drop boxes are planned to help people send and return parcels.
- Warm Home Loans: A possible new scheme has also been flagged, with further details expected.
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The Government has said the measures are intended to help households and businesses with everyday costs, with further announcements expected in the Budget.
Lewis also stressed that the Carers’ Allowance cliff edge will remain in place until the new system is introduced.
Anyone claiming the benefit should therefore continue to check the earnings rules carefully.
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