Child Benefit and Guardian’s Allowance Up-rating Order 2026

Lord Wilson of Sedgefield Excerpts

Wednesday 25th February 2026 Grand Committee

Moved by

[Lord Wilson of Sedgefield]

That the Grand Committee do consider the Child Benefit and Guardian’s Allowance Up-rating Order 2026.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

These regulations are made each year to uprate child benefit and the guardian’s allowance and set the national insurance contribution rates, limits and thresholds.

First, the Child Benefit and Guardian’s Allowance Up-rating Order 2026 sets the rates for both child benefit and the guardian’s allowance, and will ensure that these benefits are uprated by inflation in April 2026. Secondly, the Social Security (Contributions) (Rates, Limits And Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2026 set the rates of certain national insurance contributions classes and the level of certain thresholds for the 2026-27 tax year. The regulations also make provision for a Treasury grant to be paid into the National Insurance Fund if required, for the same tax year, through a transfer of wider government funds to the National Insurance Fund. Finally, they also extend the veterans’ employer NICs relief for two years until April 2028.

I turn first to the details of the Child Benefit and Guardian’s Allowance Up-rating Order 2026. The Government are committed to delivering a welfare system that is fair for taxpayers while providing support for those who need it. This order will ensure that the benefits for which Treasury Ministers are responsible and which HMRC delivers are uprated by inflation in April 2026. Child benefit and the guardian’s allowance will increase in line with the consumer prices index, which had inflation of 3.8% in the year to September 2025.

I turn now to the details of the Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2026. National insurance contributions, or NICs, allow people to make contributions when they are in work to receive contributory benefits when they are not working—for example, if they have retired or become unemployed.

National insurance contributions receipts fund these contributory benefits as well as helping to fund the NHS. The primary threshold and lower profit limits are the points at which employees and the self-employed start paying employee class 1 and self-employed class 4 NICs respectively. The primary threshold and lower profit limits will be maintained at their current levels until April 2031, and these regulations set the level for the 2026-27 year.

For employees, entitlement towards contributory benefits, such as the state pension, is determined by their earnings being at or above the lower earnings limit. For self-employed people, their entitlement is determined by their profits being at or above the small-profits threshold. These regulations uprate the lower earnings limit and small profits threshold. This is the usual process and maintains the real level of income where someone gains entitlement to contributory benefits.

Wage growth is currently higher than inflation, which means that, following the uprating by CPI, compared to last year, there will be a reduction in the number of hours that someone who has received a typical wage increase needs to work to gain entitlement. The upper earnings limit for employees’ national insurance contributions and the upper profits limit for self-employed national insurance contributions—both the points at which the main rate falls to 2%—are aligned with the higher-rate threshold for income tax of £50,270 per annum. These thresholds will be maintained at their current levels until April 2031, and these regulations set the level for the 2026-27 year.

As noble Lords are aware, the Government announced at the 2025 Budget that employer NIC thresholds, including the secondary threshold—the point at which employers become liable for secondary class 1 national insurance contributions—are also maintained at their current levels. The secondary threshold will be maintained at £5,000 until April 2031, with these regulations setting the levels for 2026-27.

I now turn to thresholds for employers’ national insurance contributions reliefs, including employees’ NICs reliefs for under-21s, under-25s, apprentices, veterans, new employees, free ports and investment zones. The regulations we are debating set these thresholds in line with other personal tax thresholds or maintain the existing level. The regulations also make provision for NIC relief for employers of veterans to be extended for a final two years until April 2028, from which point support for veterans into employment will be covered through spending settlements rather than this tax relief. This measure means that, for the next two years, businesses will continue to pay no employer NICs on earnings up to the veterans’ upper secondary threshold of £50,270 for the first year of a qualifying veteran’s employment in a civil role.

I now move on to the Treasury grant and National Insurance Fund, which is where the majority of NICs are paid and which is used to pay the state pension and other contributory benefits. The National Insurance Fund is generally self-financing, with NICs receipts paying for contributory benefits. However, the Treasury has the ability to transfer funds from wider government revenues into the National Insurance Fund, in the event that the balance of the National Insurance Fund falls below one-sixth of estimated annual benefit expenditure.

These regulations make provision for a transfer of this kind, known as a Treasury grant, of up to 5% of forecasted annual benefit expenditure, to be paid into the National Insurance Fund, if needed, during 2026-27. A similar provision will be made in respect of the Northern Ireland National Insurance Fund. The Government Actuary’s Department report laid alongside these regulations forecasts that a Treasury grant will not be required in 2026-27, but, as a precautionary measure, the Government consider it prudent to make a provision at this stage for a Treasury grant, which is consistent with previous years.

--- Later in debate ---

[Lord Altrincham (Con)]

My Lords, the Child Benefit and Guardian’s Allowance Up-rating Order 2026 sets the weekly rates from 6 April 2026. As the Committee will know, this instrument increases the weekly rates of child benefit and guardian’s allowance by 3.8%, in line with the rise in the consumer prices index between September 2024 and September 2025. As the Minister outlined, from 6 April 2026, child benefit for the eldest child will rise from £26.05 to £27.05, a rise of £1. For subsequent children, it will rise from £17.25 to £17.90, a rise of 65p per week. Guardian’s allowance will increase from £22.10 to £22.95, an 85p rise per week.

We do not oppose this order. It is standard practice to uprate these benefits in line with inflation, and it is right that families and guardians who rely on this support should see their payments maintain their value in real terms. However, uprating alone cannot substitute for a serious and coherent approach to welfare reform. Child benefit is paid to more than 6.9 million families, supporting 11.9 million children. These families are part of a substantial proportion of all households across the United Kingdom. This makes it one of the most widely accessed forms of benefit in the UK, and guardian’s allowance, while smaller in scale, plays a crucial role in supporting vulnerable children. Given that scale, the absence of a broader reform strategy is concerning. A system of this size must be sustainable, targeted and fair, both to those who depend on it and to the taxpayers who fund it. The Government’s retreat from broader welfare reform raises real concerns about long-term sustainability.

Turning to inflation, we must consider the economic climate in which this 3.8% uprating is taking place. Inflation has risen from 1.7% last year to 3.8%, a marked acceleration that is being felt in households across the country. Families are disproportionately exposed to increases in essential costs. Energy bills are an inescapable expense, particularly for larger households. Food prices inevitably carry greater weight where there are children to provide for. Clothing expenditure is cyclical and unavoidable as children grow.

When inflation is concentrated in essentials such as energy and food, the lived experience for families can feel far sharper than the aggregate CPI figure suggests. Uprating benefits preserves nominal value but does not necessarily ease the real pressure where cost increases are most acute. We must therefore ask whether the Government’s wider fiscal and regulatory decisions have contributed to the renewed inflationary pressures that families now face. Concerns remain about the cumulative impact of higher taxation and regulatory burdens, including those associated with energy policies, on businesses and households alike. When businesses face higher input costs, those costs are frequently passed on to consumers, and the result is sustained pressure on family finances.

In short, this order performs its narrow and necessary function: it uprates child benefit and guardian’s allowance in line with CPI. It does not alter policy, nor does it address the structural questions surrounding welfare reform or the economic environment in which families are living. With those observations, I conclude.

[Lord Wilson of Sedgefield (Lab)]

I thank the noble Lord for his speech and for the points that he has raised on this order. A lot of his points are outside of the scope of these SIs, but I will address them.

First, on inflation, it is in fact on the way down. These upratings have been with CPI for many years now, since 2011. Using a consistent period for uprating each year means that, over time, the index balances out. The Government will review benefit rates for child benefit and guardian’s allowance next year to determine whether they have kept pace with inflation for the 2026-27 financial year. The noble Lord made some general points about welfare and essentially the cost of living and what more we are doing for people on low incomes. He is right that energy and food costs take up a greater percentage of their incomes. That is why we annually uprate these benefits.

The Government are committed to reducing child poverty. For example, the two-child limit in universal credit will be removed from April 2026 in Great Britain, lifting a projected 450,000 children out of poverty in the final year of this Parliament. Our interventions will lead to the largest expected reduction in child poverty across a single Parliament since comparable records began. I think it is fair to say that because of that, we have a strategy for welfare and what we are going to do to alleviate poverty.

What else are we doing to tackle the cost of living? The Government are committed to meeting the needs of the most vulnerable. In April 2025, the Government introduced a new fair repayment rate to help low-income families on universal credit. This means that approximately 1.2 million families will keep more of their universal credit award each month, with families expected to be better off by around £420. The Government also provided £1 billion, including Barnett impact, to extend the household support fund. We have removed the two-child benefit cap as well, as I said. Across England, we are expanding free breakfast clubs by launching the first phase of national rollout, with 2,000 new schools joining over 2026-27.

In line with their commitment to maintain the triple lock for the duration of this Parliament, the Government will also uprate the basic and new state pension by 4.8% and will increase the national living wage from 1 April this year by 4.1% to £12.71. We are doing a lot to help a lot to help people on low incomes and those who rely on benefits, but our main focus is ultimately to get more people back into work.

As I set out in my opening remarks, the order we are considering will ensure that child benefit and guardian’s allowance increase in line with the September rate of the consumer prices index, which is 3.8%, thereby ensuring that these benefits keep their value in relation to prices.

The regulations on national insurance contributions set the limits and thresholds for the 2026-27 tax year. They allow for the collection of over £200 billion of national insurance contributions to fund contributory benefits, including the state pension, and to fund the NHS. These regulations will also extend the NICs relief for employers hiring qualifying veterans for a final two years up to April 2028. With that, I commend this order to the Committee.

Motion agreed.