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Many carers won’t benefit from increase in Carer’s Allowance earning limit

Monday 20th March 2017

Carer's Allowance is the main benefit for carers. You can still get it even if you are working, so long as your earnings are no more than a weekly amount known as 'the earnings limit'. From April 2017 the earnings limit will be going up to £116 per week.

While this should be good news for carers in low paid work, many of those on the National Living Wage (NLW) will not benefit. This is because the NLW is also increasing from £7.20 to £7.50 per hour. So, if you work 16 hours on the NLW your earnings will be £120 - preventing you from getting Carer's Allowance.

Carer's Allowance and working tax credit

Let's look at an example.

Fatima is a lone parent with a severely disabled child. She works 16 hours a week and earns the NLW. In April her weekly earnings will increase from £115.20 to £120. However, because her new wages will be £4.00 above the earnings limit, she won't get any Carer's Allowance.

Fatima may be tempted to cut her hours so that her earnings are below £116 per week. However, depending on her circumstances, cutting her hours to below 16 a week could mean she no longer qualifies for working tax credit. This is the case for others in Fatima's situation, and it's particularly likely if you are a lone parent like Fatima.

Contact a Family thinks earnings limit should reflect the NLW increase

Contact a Family believes the earnings limit should be at least £120 to reflect the increase in the NLW. This would prevent carers like Fatima from having to choose between losing their Carer's Allowance or losing their working tax credit.

Una Summerson, Head of Policy and Campaigns at Contact a Family, says:

"Thousands of families signed our open letter last year calling on the government to increase the Carer's Allowance earnings threshold in line with the National Living Wage. They will be disappointed that the government have failed to act.

"While it's good news that the threshold for Carer's Allowance is increasing, it will be meaningless for many of the families we support because of the corresponding increase in the National Living Wage."

Contact a Family has repeatedly written to the Treasury and the Department for Work & Pensions about how this policy acts as a disincentive to work, but to date they have failed to act. We will continue to campaign on this issue, so please get in touch if you have been affected by emailing una.summerson@cafamily.org.uk

Is there anything I can do in this situation?

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.

So for example, if Fatima was paying £10 per week into a pension scheme, she can deduct £5 per week from her earnings. This means that although her actual earnings are £120 she will be treated as having earnings of £115 per week, allowing her to get Carer's Allowance.

More information

Contact our freephone helpline for advice about Carer's Allowance, or see our Carer's Allowance webpage.

You can also download our free factsheet on our free factsheet on Carer's Allowance [PDF].