National Living Wage to increase but Carer’s Allowance earnings limit frozen

Wednesday 31 March 2021

From tomorrow the National Living Wage for over 23s will increase to £8.91 per hour.

While this is good news for many people in low paid work, it may not be that helpful if you’re claiming Carer’s Allowance. This is because there is a maximum amount that you can earn and remain entitled to Carer’s Allowance. This figure is currently £128 per week, and unfortunately the government has decided not to increase this figure for the financial year 2021/22.

This means that carers who are working more than 14 hours a week on the National Living Wage may have to pay out more in expenses if they want to retain their Carer’s Allowance.

Here’s an example

Fatima works 16 hours week and earns the National Living Wage. Currently she is paid £139.52 per week. She pays £24 per week into a pension scheme and is allowed to deduct 50% of these contributions from her wages. This means that she keeps her Carer’s Allowance, as after deductions she is treated as having earnings of £139.52 – £12 = £127.52.

Due to the increase in the National Living Wage, Fatima’s earnings will increase to £142.56 from April. Even after deducting 50% of her pension payments, she will be left with earnings of £130.56 per week. Her Carer’s Allowance will therefore stop.

In order to continue receiving Carer’s Allowance, Fatima will either have to increase her pension contributions or start having other allowable expenses such as childcare costs.

Contact thinks earnings limit should be aligned with the National Living Wage

We believe the earnings limit should be increased to at least £142.56 per week to reflect the increase in the National Living Wage. This would prevent working carers from having to choose between losing their Carer’s Allowance or losing their Working Tax Credit – a benefit that requires someone to be working at least 16 hours a week.

Derek Sinclair, Contact’s benefits expert, says:

“Parents juggling part-time work with caring for their disabled child shouldn’t be forced to choose between losing their Carer’s Allowance or their Working Tax Credit.

“We have repeatedly raised this issue with the governmentm and thousands of parents had previously signed an open letter asking that the earnings limit be increased in line with the National Living Wage. The Work and Pensions Select Committee has also called on the government to align the earnings limit with the National Living Wage, and it’s very frustrating that this has not yet happened.”

“The decision not to increase the Carer’s Allowance earnings limit this year but to freeze it at £128 per week will come as a shock to many carers. It’s particularly disappointing given that the government has already refused to increase Carer’s Allowance by £20 per week, to match the boost in Universal Credit payments during the Covid outbreak.”

We will continue to campaign on this issue, so please get in touch if you have been affected by emailing una.summerson@contact.org.uk

Is there anything I can do if this will affect me?

It is important to know that certain costs can be deducted from your earnings to help you qualify for Carer’s Allowance without having to cut your hours.

This includes:

  • Some alternative care costs – for example paying someone to look after your children while you are at work. There is no need for the caring to be done by a registered childcare provider. Costs can be deducted so long as you pay someone other than a close relative. However, there is a cap on the maximum amount that can be deducted for care costs – this means you cannot deduct more than half of your earnings.
  • Half of any contributions that you make into a work or personal pension.

More information

For advice about Carer’s Allowance, see our Carer’s Allowance webpage.

You can also download our free factsheet on Carer’s Allowance.