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Child Benefit pension benefits

Friday December 2019

In recent years, Child Benefit has been complicated by the High Income Child Benefit Charge (HICBC) introduced at the start of 2013. This tax charge applies if you or your partner receive Child Benefit, and either of you has income over £50,000. The HICBC recovers an increasing proportion of Child Benefit if the income is over £50,000, and all of it if the income is over £60,000.

It’s easy to overlook telling HMRC of your liability to HICBC and people have been charged interest and penalties for failure to do so. For that reason, if you know for certain that any Child Benefit is going to be recovered in full as a HICBC, you might conclude that it’s easier to abandon registering for it in the first place, saving you the bother of completing a multi-page form CH2. However, this may not always be a wise decision.

Child Benefit has two other effects with the National Insurance system:

  1. It gets the infant’s existence recorded onto the National Insurance system and guarantees that he or she is automatically allocated a National Insurance number on reaching the age of 16.
  2. A person who is awarded Child Benefit automatically gets National Insurance credits (which is relevant to establishing an entitlement to State Pension) until the child reaches the age of 12.

Both of these benefits apply even if Child Benefit is fully recovered as HICBC or not actually paid at all. All that is required is that you register for and are awarded Child Benefit.  Once registered, you can, if you know that any Child Benefit will be recovered in full by a HICBC, opt-out of receiving it.

Do ensure that the right person registers for Child Benefit. It’s only the person who is awarded Child Benefit who gets the National Insurance credits. If one partner in a couple is already paying National Insurance Contributions and the other isn’t, it’s the one who is not paying Contributions who should register for Child Benefit.

The effects of losing out on State Pension, though long-deferred, can be substantial. Calculations show that over a retirement period of 20 years, even one year’s missing contributions can cost close to £5,000 in reduced State Pension.

Regardless of the competing attractions of parenthood, do try to find the time to do it sooner rather than later. Claiming can only be back-dated up to a maximum of three months.

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