As most people are now aware, if you or your partner earn over £60,000 a year you have to repay any Child Benefit claimed. High Income Child Benefit Charge (HICBC) was introduced in 2013 and affects around 1.1 million families.
Those affected have a choice: carry on receiving child benefit but pay extra tax through the self-assessment system, or give up the benefit and don’t pay. Since this new regulation came into force, many clients understandably took the easy route and didn’t bother to claim their Child Benefit in order to prevent a tax payment becoming due.
However it can be worth continuing to claim Child Benefit and paying it back, depending on your circumstances.
From a money saving perspective, even if you (or your partner) do earn over £60,000 a year, you could continue receiving child benefits and put that cash into a high interest savings account to accumulate interest over the course of the year before paying HMRC back. Better the money is in your hands for the full year, rather than HMRC’s. Just don’t forget to pay it back or you will end up facing a penalty fine!
Another reason to continue to claim child benefit is in order to secure National Insurance credits. Credits can help to ensure you qualify for certain benefits, including the State Pension. However for entitlement of a full state pension, you need to maintain a full NI contribution record for 35 years.
Taking time off work, whether this is for a career break, to bring up a family, or any other reason, creates National Insurance gaps in an individual’s State Pension credit record. However it is possible to obtain credits for time taken off work to raise children under 12 years of age if you claim Child Benefit.
Thousands of parents may be facing a poorer retirement for failing to fill in forms once they have had a baby and taken time off work. Child Benefit can only be back dated by three months so following a change in circumstances the full entitlement of Child Benefit might not be paid.
For more information and to discuss your situation please get in touch.