Carer's Allowance 2026/27: Working While Caring and the £151 Threshold

1. What is Carer's Allowance?

Carer's Allowance is the main state benefit for people who provide substantial unpaid care for a disabled person. It is paid at £81.90 per week in 2026/27 (£4,258.80 per year) and is administered by the Department for Work and Pensions.

To qualify in 2026/27 you must:

• Spend at least 35 hours per week caring for someone who receives a qualifying disability benefit
• Be aged 16 or over
• Not be in full-time education (more than 21 hours of supervised study per week)
• Have net weekly earnings of £151 or less
• Normally live and be present in England, Scotland, or Wales(separate rules apply in Northern Ireland)

The person you care for must receive one of the following qualifying benefits:

• Attendance Allowance
• Personal Independence Payment (PIP) daily living component at the standard or enhanced rate
• Disability Living Allowance (DLA) care component at the middle or highest rate
• Armed Forces Independence Payment
• Constant Attendance Allowance at or above the normal maximum rate

Carer's Allowance is a taxable benefit. It uses up part of your Personal Allowance (£12,570 in 2026/27). However, most carers with part-time earnings will have total income well below this threshold, so no Income Tax is typically payable on the benefit itself.

2. The £151 Earnings Limit Explained

The earnings limit for Carer's Allowance is assessed on a weekly basis. Each week stands alone. You can earn above £151 in one week and still receive Carer's Allowance in every other week where your net earnings are within the limit.

For 2026/27 the limit is £151 net per week, increased from £139/week in 2025/26 following the annual uprating of benefits. The figure is broadly set to reflect approximately 16 hours per week at the National Living Wage, though the DWP sets it by its own uprating formula.

Hours worked at National Living Wage vs. the limit

At the 2026/27 National Living Wage of £12.71/hr, the table below shows how different working hours compare to the £151 net limit for a single person with no other income (assuming annual earnings below the £12,570 Personal Allowance, so zero Income Tax; and annual earnings below the £12,570 NI primary threshold, so zero Employee NI):

At 12 hours per week (annual gross £7,931) no Income Tax or Employee NI is payable as both thresholds exceed this amount — so gross equals net. However, the gross weekly figure of £152.52 is above the £151 limit, so this is borderline. In practice, weeks with bank holidays or rounding may bring some weeks below the limit. Use our Take-Home Pay Calculator and check each week individually.

Note that at 14 hours or more, even with zero tax and NI, the gross weekly earnings exceed £151. At this point you would need substantial childcare deductions or pension contributions to bring assessed earnings below the threshold.

3. How to Calculate Your Net Earnings

The DWP does not simply use your payslip take-home figure. They apply a specific calculation for Carer's Allowance purposes. The steps are as follows:

1. Start with gross earnings — all payments from employment or self-employment before any deductions, including wages, salary, overtime, bonus, commission, and tips paid through payroll.
2. Deduct Income Tax — the tax actually paid, based on your cumulative tax code. In 2026/27, the Personal Allowance is £12,570. If your annual earnings are below this, no Income Tax is payable. The basic rate is 20% on earnings from £12,571 to £50,270.
3. Deduct Employee National Insurance — 8% on earnings between the primary threshold (£12,570/yr, equivalent to £242/week) and the upper earnings limit (£50,270/yr), and 2% above. Part-time carers earning below £12,570 annually pay no Employee NI.
4. Deduct 50% of your pension contributions— if you contribute to a personal or workplace pension, half your contribution reduces your assessed earnings. Your employer's contributions are not counted.
5. Deduct permitted expenses — qualifying childcare costs (see Section 4) and expenses wholly and necessarily incurred in performing your job.

4. Permitted Deductions: Childcare and Pension

Childcare Costs

If you pay for childcare so that you can work, you can deduct those costs from your assessed earnings. The 2026/27 deduction limits are:

• Up to £60 per week for one dependent child
• Up to £100 per week for two or more dependent children

The deduction is capped at the actual amount paid if lower than the maximum. Childcare must be provided by an approved or registered childcare provider — registered childminders, day nurseries, after-school clubs, and breakfast clubs all qualify. Informal arrangements with relatives or neighbours do not generally qualify, even if money changes hands.

This deduction is particularly powerful. A carer working 16 hours at NLW (gross £203.36/week) who pays £100/week for childcare for two children would have assessed earnings of £103.36 — well below £151 — assuming they owe no Income Tax or NI.

Pension Contributions

Half of any personal pension contributions you make can be deducted from your assessed earnings. This applies only to your own contributions — not your employer's auto-enrolment contributions.

Example: If you contribute £40/week into a personal pension, £20 of that reduces your assessed earnings. Combined with childcare deductions, pension contributions can make a meaningful difference for carers working more hours at higher wages.

The Pension Annual Allowance for 2026/27 is £60,000 (or 100% of UK earnings, whichever is lower). Carers with minimal earnings can still contribute up to £2,880 net (£3,600 gross with basic-rate tax relief) into a personal pension annually even with no earnings — but at this level the 50% deduction from assessed earnings would only yield a small benefit.

5. Self-Employment and Carer's Allowance

Self-employed carers are assessed on their net profit — the income remaining after deducting all allowable business expenses. The DWP typically averages this over a period that reflects your normal pattern of trade, which may be the previous tax year or a representative recent period.

What Can the Self-Employed Deduct?

• All legitimate business expenses claimed on your Self Assessment return
• Income Tax on the profit (based on your Self Assessment calculation)
• Class 2 NI: £3.45/week (£179.40/year) if annual profit exceeds £6,725
• Class 4 NI: 6% on profits between £12,570 and £50,270; 2% above £50,270
• 50% of personal pension contributions
• Childcare costs (same limits as employed carers: £60/£100 per week)

If your self-employment income fluctuates significantly from week to week, the DWP may assess earnings over a suitable average period rather than week by week. Contact the Carer's Allowance Unit or Citizens Advice if your income is irregular — the averaging process can work in your favour.

6. NI Credits and Your State Pension

One of the most valuable — and often overlooked — benefits of Carer's Allowance is the National Insurance credits it provides. When you receive Carer's Allowance, you automatically receive Class 1 NI credits for each week you are paid.

These credits count as qualifying years towards the new State Pension. In 2026/27, the full new State Pension is worth £241.30 per week (£12,547.60/year), and you need 35 qualifying years to receive the full amount. Each year of credits is therefore worth approximately £6.89/week (£358.28/year) of future State Pension — a significant long-term financial benefit from caring.

For carers working part-time with annual earnings below the NI Lower Earnings Limit (around £6,396/year in 2026/27), employment alone does not generate qualifying NI years. Carer's Allowance credits fill this gap automatically.

7. Underlying Entitlement to Carer's Allowance

A commonly misunderstood concept is underlying entitlement. This arises when you meet all the eligibility criteria for Carer's Allowance — including the earnings limit — but cannot be paid it because another benefit you receive (typically the State Pension or Contributory Employment and Support Allowance) is equal to or more than the Carer's Allowance rate of £81.90/week.

This occurs because Carer's Allowance is an overlapping benefit. It cannot be paid in addition to certain other contributory benefits at their full rate. The lower-value benefit is effectively absorbed.

However, having an underlying entitlement unlocks valuable additions in other means-tested benefits:

It is important to formally claim Carer's Allowance and be assessed — even if you will not actually receive the payment — so that this underlying entitlement is recognised and can be used in other benefit calculations. The DWP or your local Jobcentre Plus can confirm your underlying entitlement status.

8. Practical Strategies to Stay Under the £151 Limit

Managing your earnings to remain below £151 net per week requires active planning, especially if your hours or pay vary. The following strategies are most effective:

1. Track Your Net Earnings Every Week

Because the limit is weekly, not annual, you need visibility on each week individually. Build a simple spreadsheet that takes your gross weekly pay, subtracts Income Tax and NI (if applicable), and then subtracts childcare costs and 50% of pension contributions. Compare the result against £151 before each week starts if possible.

2. Negotiate a Fixed-Hours Contract

Variable-hours and zero-hours contracts make weekly earnings unpredictable. Where possible, negotiate a fixed-hours contract at a level you know keeps you below the limit. At NLW of £12.71/hr, 11 hours per week generates gross earnings of £139.81 — safely below the £151 net threshold assuming no Income Tax or NI.

3. Use Pension Contributions Strategically

If you are close to the limit, increasing personal pension contributions reduces your assessed earnings by 50p for every £1 you contribute. If you are consistently £20/week over the limit, increasing your pension contribution by £40/week brings you back under. This also builds your retirement savings.

4. Maximise Childcare Deductions

If you pay registered childcare costs, claim the full deduction (up to £60/week for one child, £100/week for two or more). Keep receipts and ensure your provider is registered. This deduction alone can allow you to work significantly more hours while remaining within the limit.

5. Plan Around Bonuses and Holiday Pay

One-off payments such as bonuses, commission, or accrued holiday pay paid in a lump sum can push you over the £151 limit for the week they are paid. The DWP assesses these in the week payment is received. If you know a large payment is coming, you may choose to reduce your hours in that week (affecting only that week's Carer's Allowance entitlement).

6. Report Changes Promptly

You must tell the DWP immediately if your earnings are going to change — including pay rises, changes in hours, starting or stopping work, or changes to childcare costs. Overpayments arising from unreported changes must be repaid and can attract civil penalties. Report changes through your Carer's Allowance online account or by calling the Carer's Allowance Unit on 0800 731 0297.

Frequently Asked Questions