Chancellor Rachel Reeves is reportedly preparing to abolish the controversial two-child benefit cap in the upcoming November 2025 Budget, as the government seeks to alleviate child poverty and restore fairness in welfare policy.
At the same time, Reeves is expected to increase taxes on high earners. Sources say she is considering rising capital gains tax rates, tightening inheritance tax rules, and closing loopholes on foreign income.
Advocates argue that removing the two-child cap could lift hundreds of thousands of children out of poverty, while those supporting tougher taxation on the rich say it is essential to balance the books without hitting working people. The Institute for Fiscal Studies has estimated that reversing the cap could cost around £3 billion per year.
Reeves faces significant challenges. Although she has pledged not to raise income tax, VAT, or National Insurance for “working people,” rising borrowing costs, welfare spending pressures, and under-performance in growth forecasts are increasing pressure for the government to find revenue somewhere else.
As the autumn budget looms, the balance Reeves strikes between supporting low-income families, taxing the wealthy more heavily, and honoring her manifesto promises will be closely scrutinised.
