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Why it’s worth getting Child Benefit and how to navigate the High Income Child Benefit Charge, we’ve got the answers to your questions.
As we emerge from lockdown and our thoughts turn to holiday planning, eating out or shopping, it’s a good time to review your personal finances.
Child Benefit has other plus points too. It can give you National Insurance credits which help protect your State Pension and it also helps children to get their National Insurance number automatically at 16.
You may have heard of the High Income Child Benefit Charge (HICBC), which you might have to pay if either you or your partner has an individual income over £50,000. Don’t let this put you off though, you just need to get Child Benefit in the best way that benefits the whole family:
• check if you’re affected by HICBC, especially if you’ve had a promotion or pay-rise or you receive benefits-in-kind like a company car for example
• if you are affected and have to pay the charge, don’t let this put you off. Even if you decide you don’t want to receive the monthly payments, you should still complete the form and just opt out of the payments so you can receive the other perks
• if you’re a couple and one of you isn’t working or paying National Insurance contributions (for example if you’re taking a career break or on maternity leave), this person should fill in the Child Benefit form to protect their State Pension and make sure there aren’t any gaps in their National Insurance record. You can also check your National Insurance record to to see which of you would benefit the most.
You can see it’s well worth claiming and is about more than just boosting your family budget.
Read on for more details…
You need to fill in and submit a Child Benefit form. Do it as soon as possible because HMRC can only backdate your claim by up to three months.
If you’re part of a couple, only one person can get Child Benefit for a child.
Remember to get in touch with HMRC if your circumstances change as this might affect your Child Benefit payments, or if you need to add a child to an existing claim.
For couples, it’s important to make sure that if one of you isn’t working or paying National Insurance (NI) contributions, they complete the form. This is because they will automatically get National Insurance credits until their child turns 12 if they get Child Benefit. National Insurance credits help protect their entitlement to the State Pension.
You’ll need 35 qualifying years to get the new full State Pension. If one of you takes a break from work to look after your child, or doesn’t earn enough to pay NI contributions, the NI credits from Child Benefit count towards the 35 years.
The High Income Child Benefit Charge, or HICBC, is a tax charge which has to be paid by people with an individual income of over £50,000, who get Child Benefit or whose partner gets it. The charge increases gradually for those with incomes between £50,000 and £60,000 and is equal to 1% of a family’s Child Benefit for every extra £100 of income that is over £50,000 each year. Remember, the highest earner has to pay the charge. This applies even if the other partner is claiming Child Benefit and receiving the payments.
• decide to pay HICBC via a Self Assessment tax return
• or you can opt out of receiving the Child Benefit payments so you don’t pay HICBC, while keeping the Child Benefit claim active and receiving the other non-financial benefits
Add up all your individual income to see if HICBC affects you, especially if you get a bonus or promotion. Your salary and taxable benefits-in-kind, like a company car, are part of your total taxable income, and can also affect whether you need to pay HICBC. Don’t forget to include any income you get from other sources, such as renting out a property.
Use the Child Benefit Tax Calculator to see how much you may have to pay.
If you don’t want to pay the HICBC, you can opt out of receiving Child Benefit payments, while still keeping a claim active. This means you won’t have to pay the charge, but you’ll still protect your State Pension by getting National Insurance credits until your child turns 12, for you or your partner.
You will still have to get in touch with HMRC if your circumstances change as this might affect your Child Benefit payments.