Carer’s Allowance is the main benefit for people who provide substantial care to a disabled or ill person. But the earnings limit has long been a source of frustration — set at just £196/week net in 2026/27, it prevents many carers from combining paid work with their caring role.
This guide explains exactly how the earnings test works, what you can deduct to reduce your net earnings, and how to avoid common mistakes that lead to overpayments.
Carer’s Allowance Basics
| Rate 2026/27 | £81.90 per week |
| Annual value | £4,258.80 |
| Earnings limit | £196/week net |
| Minimum care hours | 35 hours per week |
| Who you care for | Must receive PIP Daily Living, DLA Middle/High Care, Attendance Allowance, or certain disability benefits |
| Your age | Must be 16 or over; not in full-time education |
How the Earnings Limit Works
The earnings limit is net earnings — not your gross wage. To find out if you are under the limit:
Step 1: Start with gross earnings from employment or self-employment Step 2: Deduct income tax (including any PAYE) Step 3: Deduct National Insurance contributions (Class 1 or Class 4) Step 4: Deduct half of any pension contributions you make (including employer contributions to your pension if they come from your own pay) Step 5: Deduct allowable care/childcare expenses (see below)
The result must be £196 or less per week.
Calculating Net Earnings: Employee Example
Emma works part-time, earning £250/week gross:
| Deduction | Amount |
|---|---|
| Gross weekly earnings | £250.00 |
| Income tax (at 20%, on amount above weekly PA of £241.73) | −£1.65 |
| Employee NI (12% on earnings between £242 and £967/week) | −£0.99 |
| Pension contribution (10% employee contribution) | −£25.00 |
| Deductible pension (half of £25) | −£12.50 |
| Estimated net earnings | ~£235 |
Emma’s net earnings are approximately £235/week — over the £196 limit. She does not qualify for Carer’s Allowance in weeks she works her standard hours.
What Can Be Deducted
Pension Contributions
You can deduct half of your gross pension contributions (employee contributions only — the employer’s contribution is deducted separately if it forms part of your remuneration package).
This is one of the most powerful tools for carers close to the earnings limit. Increasing your pension contributions reduces the amount of net earnings counted.
Example: If Emma increases her pension contribution from 10% to 30%:
- Pension contribution: £75/week
- Deductible (half): £37.50
- This significantly reduces her net earnings below the threshold
This is entirely legitimate — DWP explicitly allows pension contributions as a deduction.
Care/Childcare Expenses
You can deduct the cost of care for:
- A child under 16
- A disabled person you are not caring for under the Carer’s Allowance claim
Condition: The care must be needed to allow you to work (not optional). You cannot claim costs for informal care by a family member who lives with you.
Self-Employed Deductions
For self-employed carers:
- Deduct all allowable business expenses first (the standard HMRC rules)
- The figure used is net profit after expenses
- Then apply the tax, NI, and pension deductions above
The Weekly Test
Carer’s Allowance is assessed week by week. This matters if your earnings vary:
| Week | Net earnings | CA entitlement |
|---|---|---|
| Week 1 | £180 | Yes |
| Week 2 | £250 (overtime) | No |
| Week 3 | £190 | Yes |
You must notify DWP when your earnings change. Many carers with variable pay have ongoing reporting obligations. Failure to report means overpayments — which DWP will require to be repaid.
The “Underlying Entitlement” to Carer’s Allowance
Some people cannot receive the payment of Carer’s Allowance because they receive another benefit that is the same amount or more (e.g., contributory ESA support group, State Pension). However, they may have underlying entitlement to Carer’s Allowance — which:
- Gives them the Carer’s Addition within Pension Credit (£46.40/week)
- May affect their Universal Credit calculation
- Counts for State Pension years via NI credits
If your State Pension or other benefits already exceed the CA payment, check whether underlying entitlement to CA would still benefit you via Pension Credit or UC components.
The Earnings Limit and National Living Wage
The Carer’s Allowance earnings limit has been widely criticised for being too low. At £196/week net, a carer working 16 hours at National Living Wage (£12.21/hour in 2026/27) would earn £195.36 gross — barely under the limit and at risk of losing entitlement from any small pay increase.
The government has announced changes to the earnings threshold for Carer’s Allowance — the limit was raised from £151 to £196 in April 2024. Further increases are expected but not confirmed for 2026/27.
Carer’s Allowance and State Pension
You cannot receive both the full Carer’s Allowance payment and the State Pension simultaneously — if your State Pension equals or exceeds the Carer’s Allowance rate (£81.90/week), CA is not paid. However:
- You retain underlying entitlement to CA — gaining the Carer’s Addition in Pension Credit (£46.40/week) if on Pension Credit
- If on Universal Credit, the Carer Element (£198.31/month in 2026/27) is separate and not affected by State Pension
Carer’s Credit: The Alternative
If you cannot claim Carer’s Allowance (earnings too high, or caring for someone who does not receive a qualifying benefit), consider Carer’s Credit. This protects your NI record (and therefore State Pension) without a payment, as long as you care for someone for 20+ hours per week.