New analysis: Benefit cap blocks support for 1 in 5 families hit by two child limit
Rory Ewan Published on 24th November 2025
"Our analysis finds that one in ten children hit by the 2 child limit won't benefit from it being abolished, and a further one in ten will only benefit partially, unless the Chancellor lifts the Benefit Cap too. This interaction highlights once again the complexity of the benefit system, and the complex analysis needed to ensure support on the frontline gets to those families who need help the most."
Deven Ghelani Founder and Director, Policy in Practice
The two child limit is limiting the potential of one in five children on Universal Credit
Since 2017, families with three or more children have seen their benefit entitlements limited, with no additional child element for third and subsequent children born after April 2017. Both the financial impact and number of affected households are large: £3,500 a year foregone per child for 400,000 families.
This looks likely to change in Wednesday’s Autumn Statement. The Chancellor is widely expected to remove the two child limit, or at least raise the threshold, as one of the most cost effective ways to reduce child poverty.
While this is welcome, we find that the complexity of the benefit system will limit the impacts on larger families and prevent some from gaining from a change that could otherwise provide much needed financial relief.
Our data gives us unique insights into how removing the two child limit will impact low income households
We help over 100 local authorities across the UK to show which households are struggling today, identify the benefits they are (and could be) receiving, and model the impact of planned policies, which we will learn about in the budget tomorrow.
Using administrative data on low income households from eight local authorities, we see that from 105,000 households on Universal Credit, of whom 49,000 have children, we find that 17% of families are currently losing support due to the two child limit. The picture is starker when we focus on children; because the 2 child limit affects larger families 30% of children are losing out.
But, not all of these children will gain if the Chancellor drops the policy on Wednesday. Instead, the picture is complicated by the existence of a second cap, the Benefit Cap which sets an overall limit for household benefit income (currently set at £25,000 in London, or £22,000 outside, and less if you’re single).
"What is sometimes called the 'two child benefit cap' refers to two independent policies."
Rory Ewan, Senior Policy Analyst Policy in Practice
Due to the benefit cap, only four in five children will benefit from the removal of the two child limit
Our new analysis, featured in the Financial Times, finds that:
- One in ten households (10.4%) currently held back by the two child limit won’t gain at all when the policy is reversed. In our sample of eight local authorities, there will be 3,100 children seeing no financial gain because their family is already capped by the overall benefit cap
- A further one in ten families (10.5%) will only see part of their potential gain as they become benefit capped through the reversal of the policy
Larger families, those out of work, and those whose rents have risen rapidly are most likely to lose out from the interaction with the benefit cap.
Share of low income households that gain, fully or partially, for various policy change scenarios
| Remove 2 Child Limit | Remove 2 Child Limit + raise Benefit Cap | Replace with 3 Child Limit | Replace with 3 Child Limit + raise Benefit Cap | |
|---|---|---|---|---|
| Already benefit capped No financial gain | 10.4% | 4.9% | 10.4% | 4.9% |
| Become benefit capped Only gain partially | 10.5% | 6.2% | 9.7% | 3.8% |
| Not benefit capped Gain in full | 79.1% | 88.8% | 79.8% | 91.3% |
| Cost per child who gains financially | £95 | £99 | £76 | £101 |
What if the Chancellor also increased the benefit cap?
Raising the cap so it is equivalent to the living wage (to £29,000 in London, and £26,000 outside of London) halves the share of households missing out on all financial gains, with 95% of children gaining in full. The downside is cost.
While the cost per child benefiting remains roughly the same as just removing the two child limit (£99 compared with £95), the Chancellor would also be raising the cap for households that are not affected by the two child limit.
We explored whether the Chancellor would be able to help more children by raising the benefit cap, while abolishing the hit by the two-child limit or, if funding was constrained, raising it to three children.
This combination also halves the number of households that gain nothing (to 5%), but others will gain less, and the policy costs more per child (£101), as we need to factor in the cost of raising the cap for families impacted by the Benefit Cap, but not impacted by the two child limit.
Whatever the Chancellor decides, we are helping local authorities understand which households stand to gain and which will still be struggling
Our local authority partners who use our LIFT platform will be able to see which of their residents are currently affected by the two child limit and how their financial situation will change as a result of Wednesday’s Autumn Statement.
Opening the household map shows you all this information on a map of your area, see the example below, allowing you to quickly and easily identify families in need.
Our Low Income Family Tracker (LIFT), showing exactly which households are affected by benefit policies and Autumn Statement changes (demo data shown)
We know the benefit system needs to be simpler and more accessible
Our latest Missing Out analysis found £24 billion worth of benefits and support is currently unclaimed, money that could help families hit by the two child limit and the benefit cap.
This analysis highlights once again the complexity of the benefit system, and the analysis needed to ensure support on the frontline gets to those families who need help the most.
