Two-child limit: full roll-out and absolute child poverty

This page shows how to reproduce published estimates of reforming the Universal Credit two-child limit that assume the limit is fully rolled out, such as the IFS Green Budget 2025 comment Options for reforming the two-child limit, and how PolicyEngine UK’s results compare. For the 2029-30 comparison with DWP, OBR and Resolution Foundation estimates, see Child poverty validation: removing the two-child limit.

Settings that matter¶

Year. Budget 2025 removed the limit from 6 April 2026, and the baseline encodes that (gov.dwp.universal_credit.elements.child.limit.child_count is .inf from 2026-04-06). In 2026-27 and later, an “abolish the limit” reform therefore changes nothing. Model 2025-26 (YEAR = 2025), or re-impose the limit as a counterfactual.

Roll-out. Under current law a child born before 6 April 2017 is protected from the limit, so in 2025-26 the limit applies only to part of the large families it will eventually affect. Estimates “when fully rolled out” treat every child as born after that date. In PolicyEngine UK, set the born_before dates for Universal Credit and Child Tax Credit to a date before any child’s birth. The same date also preserves the higher Universal Credit child element for a first child born before 6 April 2017, so full roll-out removes that too. IFS full roll-out analysis likewise removes the Child Tax Credit family premium, its legacy equivalent (IFS, 2024, Table 6.5).

Take-up. Universal Credit claiming comes from would_claim_uc, set in the data, and does not respond to the reform. For full take-up, set it to true for every benefit unit with set_input before calculating anything.

Poverty measure. The poverty flags are household variables. Count children by mapping them to people and multiplying by is_hbai_dependent_child, the HBAI definition of a child:

The absolute line is 60% of the FYE 2025 median held constant in real terms, the reference year HBAI adopted in March 2026. Estimates published before then, including the IFS comment and DWP’s Budget 2025 poverty impact notes, use 60% of the FYE 2011 median. To use that line, override household.poverty.absolute_poverty_threshold_bhc and _ahc for the year, as below. The snippet approximates the FYE 2011-based line by its FYE 2021 value in the parameter file (£305.70 a week BHC, £261.92 AHC, for a couple without children), uprated by the model’s CPI index; HBAI uprates by its own CPI variants, so this is close but not exact.

Exceptions. The model does not apply the statutory exceptions to the limit (multiple births, adoption, non-parental caring arrangements and non-consensual conception; Universal Credit Regulations 2013, Schedule 12). DWP counted 26,300 households with an exception in April 2025, out of about 470,000 affected (UC two-child limit statistics, April 2025).

Code¶

import numpy as np
from policyengine_uk import CountryTaxBenefitSystem, Microsimulation

# Local path to the Microcosm UK 2024-25 national release file.
DATASET = "microcosm_uk_2024_25.h5"
YEAR = 2025  # fiscal year 2025-26, the last year the baseline has the limit
WINDOW = f"{YEAR}-01-01.{YEAR}-12-31"
UC = "gov.dwp.universal_credit.elements.child.limit"
CTC = "gov.dwp.tax_credits.child_tax_credit.limit"

# Full roll-out: no child keeps the pre-6 April 2017 protection. This also
# removes the higher first-child element, which the same date preserves.
FULL_ROLLOUT = {f"{p}.born_before": {WINDOW: 10000101} for p in (UC, CTC)}

# Optional: the FYE 2011-based absolute line used by HBAI before March 2026,
# approximated as its FYE 2021 value uprated by the model's CPI index.
cpi = CountryTaxBenefitSystem().parameters.gov.economic_assumptions.indices.obr
uprate = cpi.consumer_price_index(f"{YEAR}-01-01") / cpi.consumer_price_index(
    "2020-01-01"
)
FYE2011_LINE = {
    "household.poverty.absolute_poverty_threshold_bhc": {WINDOW: 305.7 * uprate},
    "household.poverty.absolute_poverty_threshold_ahc": {WINDOW: 261.92 * uprate},
}


def child_limit(n):
    return {f"{p}.child_count": {WINDOW: n} for p in (UC, CTC)}


def run(extra, full_take_up=False):
    sim = Microsimulation(dataset=DATASET, reform=extra or None)
    if full_take_up:
        n = len(sim.calculate("benunit_weight", YEAR))
        sim.set_input("would_claim_uc", YEAR, np.ones(n, dtype=bool))
    child = sim.calculate("is_hbai_dependent_child", YEAR)
    benefits = (
        sim.calculate("universal_credit", YEAR).sum()
        + sim.calculate("child_tax_credit", YEAR).sum()
    )
    poor = {
        m: (sim.calculate(m, YEAR, map_to="person") * child).sum()
        for m in ["in_poverty_ahc", "in_poverty_bhc"]
    }
    return benefits, poor


def compare(setting, full_take_up=False):
    base_cost, base_poor = run(setting, full_take_up)
    for name, n in [("abolish", np.inf), ("three-child limit", 3)]:
        cost, poor = run({**setting, **child_limit(n)}, full_take_up)
        lifted = {m: (base_poor[m] - poor[m]) / 1e3 for m in poor}
        print(
            f"{name}: cost £{(cost - base_cost) / 1e9:.2f}bn, children lifted "
            f"(thousands) AHC {lifted['in_poverty_ahc']:.0f}, "
            f"BHC {lifted['in_poverty_bhc']:.0f}"
        )


compare({})  # current law: pre-April 2017 children protected
compare(FULL_ROLLOUT)
compare(FULL_ROLLOUT, full_take_up=True)
compare({**FULL_ROLLOUT, **FYE2011_LINE}, full_take_up=True)

Reform keys use the YYYY-MM-DD.YYYY-MM-DD form, which the dictionary and Reform.from_dict routes read the same way.

Results, 2025-26¶

Run on 23 October 2026 with policyengine-uk 2.147.2 and the Microcosm UK 2024-25 national release microcosm-uk-2024-25-national-20261023T075039Z-a133f37a (SHA-256 64f83900…). Cost is the change in Universal Credit and Child Tax Credit spending. Children lifted are children out of absolute low income.

Under current law, 467,000 benefit units with 1.64 million children gain from abolition in 2025-26. DWP’s April 2025 statistics count 453,600 households not receiving the child element for at least one child, with 1.61 million children.

Why the results differ from the IFS’s¶

• Roll-out. Running current law in 2025-26 gives about a third of the IFS headcount, because most children in large families are still protected. Full roll-out is the largest single setting.

• Take-up. With full roll-out and full take-up, the cost (£3.58bn) and the number of families gaining (778,000 benefit units, against the IFS’s “over 800,000 households”) match the IFS closely.

• The remaining gap. Children lifted stay about a quarter to 30% short of the IFS figures. These checks do not isolate the cause. Plausible contributors, none of them ruled out:

  • Family size in the data. At FYE 2025 the Microcosm release has about 10% fewer children in families with three or more children than HBAI (4.20 million against 4.64 million, HBAI table 4.5db), and about 21% fewer of those children in relative low income after housing costs (1.64 million against 2.07 million). See PolicyEngine/microcosm#1371. A shortfall in relative low income does not show how many children cross an absolute line after the reform, so this alone cannot size the gap.

  • The poverty line. The snippet approximates the FYE 2011-based line (see above), so it is not exactly the IFS line.

  • Exceptions. The snippet does not apply the statutory exceptions.

  • Take-up. Full take-up here sets would_claim_uc to true for everyone, which is not the IFS adjustment to reported take-up (IFS, 2024, Appendix 6B), and this page has not matched that adjustment.

  Attributing the gap to any one of these would need a controlled comparison.

• Data year and method. The IFS used TAXBEN on FRS 2022-23 and 2023-24, additionally reweighting 2022-23 by number of children, and FRS data as published before HBAI’s March 2026 administrative-data linking. PolicyEngine uses FRS 2024-25 and its own calibration.

References¶

• IFS, Options for reforming the two-child limit, Green Budget 2025 comment, 23 October 2025 (endnotes 3 to 5 and 8 for the line, data and roll-out).

• IFS, Child poverty: trends and policy options, 3 October 2024, Table 6.5 and Appendix 6B (take-up).

• DWP, Universal Credit claimants: statistics on the two-child limit policy, April 2025.

• DWP, Households Below Average Income FYE 2025, background information and methodology, section 2.3 (absolute reference year).

• Universal Credit Regulations 2013, regulation 24A and Schedule 12.