MPs and charities have called for an urgent overhaul of Carer’s Allowance following revelations that thousands of carers have been forced to repay huge sums after unknowingly breaching earnings rules.

How bad is the problem?

In the last financial year, more the 34,500 carers were being chased because they owed money to DWP in the form of over payments. The average debt is just over £2k. Many are less, but some care givers owe as much as £22,000.

The findings prompted former Conservative Work and Pensions Secretary Sir Iain Duncan Smith to call for the Department for Work and Pensions (DWP) to investigate the issue.

Charity group Carers UK also responded with the launch of a manifesto, demanding Carer’s Allowance be raised by at least £11.10 per week and a relaxation of the rules on how much you can earn while still receiving the allowance.

But how does Carers Allowance currently work, and who is entitled to it?

What is Carer’s Allowance?

Carer's Allowance is a government benefit for people who are giving regular and substantial care to disabled people. The allowance is worth up to £81.90 a week for the 2024-25 tax year.

You must fulfil the following criteria to be eligible:

• Spend at least 35 hours a week caring for someone who is receiving a qualifying disability benefit
• Be 16 years old or over
• Not be in full-time education

You cannot earn more than £151 per week after tax, National Insurance and certain expenses (in 2024-25). Find out more about eligibility here.

Why are carers having to make repayments?

To qualify for Carer's Allowance, claimants can’t earn more than £151 per week after tax.

There’s currently no taper on this threshold, which means the income cap acts like a cliff edge – earning even 50 pence more a week makes you ineligible for the benefit. Many carers have a variable income because of the nature of their caring role. Caring is unpredictable, meaning so is their earning potential. Many carers are operating on a week by week basis, on casual or zero-hour contracts.

If you breach this limit without realising it, and continue to receive the allowance, then the government will treat it as an overpayment and expect you to repay the money.

Furthermore, many recipients don’t know that you cannot get the full amount of both Carer’s Allowance and your state pension at the same time. If your pension is £81.90 a week or more, you will not get a Carer’s Allowance payment, although you may be entitled to Carers Credit.

Emily Holzhausen, director of policy and public affairs at Carers UK, said: ‘Carers often say they have made the mistake unwittingly; they don’t realise a small pay rise or Christmas bonus has taken them over the limit. Many are also paid irregularly, making it hard for them to work out their overall income.’

It could take carers on a low income years or even decades to pay off.

What changes are being called for?

Two former DWP ministers have now called for the government to pause the repayment demands, including Duncan Smith, who said: ‘The best thing is for the DWP now to pause these demands and review carefully what was behind all of this to make sure these are not mistakes by the DWP but are genuinely about individuals failing to notify the department.’

Labour MP Sir Steven Timms, Chair of Commons Work and Pension Select Committee feels that the DWP should stop these over payments from happening in the first place. He said: ‘The department told the committee that it receives notification from HMRC every time a claimant goes over the limit, but it appears the DWP ignore most of them. Therefore, carers continue to receive benefit they are not entitled to, resulting in over payments that should never have been allowed. The government policy is to encourage people in to work, but the risk of this happening is making either that or claiming (working or claiming Carers Allowance) understandably, off putting.'

Meanwhile, Carers UK has launched a manifesto calling on all political parties to ‘commit to a new social contract for unpaid carers’.

The manifesto includes a number of calls that the charity claims will reduce the penalties carers face, such as being plunged into poverty, having to give up paid employment and experiencing poor and broken physical and mental health.

The calls include:

• Raise Carer’s Allowance by at least £11.10 a week in England and Wales.
• Increase the earnings limit for Carer’s Allowance to the value of 21 hours work a week at the National Living Wage rate and define this link in law so carers’ ability to earn is not eroded over time.
• Reform the eligibility rules for Carer’s Allowance – giving access to a lower rate of benefit for those caring between 20 and 35 hours a week and enabling more than one person to receive the benefit if multiple people are caring for the same person.
• Provide additional financial support to carers of state pension age, including a new, non-means-tested payment. There should also be a review of pension rules for carers.
• Modernise and digitise the delivery of Carer’s Allowance to make it less complicated for claimants, to protect carers from overpayments and to allow for much faster adjustments to recipients’ payments.
• Make the NHS the most carer-friendly in the world and by building in new responsibilities to recognise unpaid carers’ health and promote their wellbeing.

Holzhausen added: ‘There’s not a moment to lose for reform, carers have been waiting far too long for this. Their support for older, disabled and ill relatives and friends is worth billions every year. They need and deserve better.’ At Citizens Advice Southampton, we agree.