A two-child limit on childcare benefits will be lifted by next April to help poorer families into work, The i Paper can reveal.
Families on universal credit can claim back 85 per cent of their childcare costs while they work – but the amount is currently capped at £1,071 for one child or £1,836 per month for two or more children.
The change means families will get an extra £736 for each additional child.
In the last Budget, the Government announced it would increase this support for larger families – but the timeline had not been confirmed.
The uplift will happen before the end of the 2026-27 financial year “subject to the necessary delivery and legislative changes”, according to a Government source.
A Department for Work and Pensions spokesperson told The i Paper: “By the end of this financial year, universal credit childcare support will change so larger families are not penalised for moving into work.”
Ruth Talbot, senior policy and research manager at the Save the Children charity, said parents with three young children face nursery costs that are “way beyond” the limit if they get a job.
She said: “It will make a huge difference to those who are already claiming universal credit but just can’t claim as much as they need and are struggling.
“But it also means people who aren’t using universal credit childcare because they can’t work because of the childcare costs now may feel that employment is a possibility for them.”
However, she called on the Government to go further and address other barriers in the system, such as the need for families to pay for childcare costs upfront before they can claim back support.
Parents are putting nursery fees on credit cards or simply unable to use the scheme due to a lack of funds, according to a report by the Early Education and Childcare Coalition and the London School of Economics shared with The i Paper. Others reported months-long delays affecting their claims.
A “cliff edge” in the system also means families who earn enough to come off universal credit face a steep drop in childcare support, from 85 per cent of their costs covered to 20 per cent on the tax-free childcare scheme.
The research recommended replacing the universal credit scheme and the other childcare support for working parents with a single offer that would cover all fees for the poorest households.
Such a scheme could be gradually withdrawn as incomes rise and remove the need for upfront payments without increasing costs for taxpayers, the experts said.
“Many people don’t take up the universal credit childcare element because either they don’t know about it or because the way it’s administered is very stressful,” Talbot said.
Sarah Ronan, executive director of the Early Education and Childcare Coalition, which represents more than 30 sector groups, said the increase to the two-child cap will “provide immediate relief” for larger families at a “really critical time of rising costs”.
“The increase in the cap does need to happen straight away to provide more relief and support to parents, but that doesn’t address the fundamental design flaws in the system around paying for costs upfront, which are really prohibitive if you’re trying to get back into work,” she warned.
Some parents can get money from the “flexible support fund” to pay upfront costs of up to one month of childcare, but Ronan said it is “discretionary” and “not guaranteed”.
She said: “There is a whole issue around how that is communicated to parents and the discretion of job coaches in job centres as well, and whether they actually know about it and can offer that as an option and a service.”
She added that most parents they have spoken to “haven’t even heard of the flexible support fund”.
A Department for Work and Pensions spokesperson said they are “determined to break down the barriers that prevent people from returning to work, ensuring families can access the childcare support they need to build financial security”.
They said the Government has extended support for those returning from parental leave and through the flexible support fund.
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