How do financial incentives affect household fertility decisions? Government policies―particularly their treatment of children in the tax-and-benefit system―change the costs and benefits of having children and thus may affect fertility decisions. However, the size of these effects will depend on individual and household preferences and other factors affecting family incomes. Our research examines the effect of a major change in the treatment of children in the benefit system of the UK: the introduction of the two-child limit for cash benefits to low-income families. While a handful of countries restrict benefits to the third or fourth child, the UK’s policy is the first instance of capping benefits at the second child.