By Cheaper Accountant, Sep 6 2019 07:18AM
It may be tempting to simply not register for Child Benefit if you are a high earner due to the High-Income Child Benefit Charge (HICBC) which can result in the full amount of child benefit for the year being repaid when your self-assessment tax return is filed. Makes sense. However, you could be missing out on a subtle benefit that not many people will be aware of. Let me explain further below.
The repayment mechanism that was introduced by the Government some years ago now as part of the "Austerity" reforms is applied when the parent claiming child benefit, or their partner, earns more than £50,000 a year. The repayment rate increases from above £50,000 all the way up to £60,000. At an income of £60,000 the charge (or repayment) is equal to 100% of the child benefit received.
If you are a parent earning more than £60,000 a year the temptation may be to simply not to make a claim for the child benefit, since this will need to be repaid in full.
However, what not everyone realises is that a claim for child benefit also confers state pension rights. A parent who claims and is registered for child benefit relating to a child under the age of 12 will automatically receive Class 3 National Insurance credits. These National Insurance credits provide a qualifying year for state pension purposes of up to 12 years.
An individual needs 35 qualifying years for the full single-tier state pension and at least 10 qualifying years for a reduced state pension. Now you can see the appeal here!
Failing to register for child benefit can mean missing out on an automatic entitlement to 12 qualifying years towards the state pension. This could be a huge miss if the parent is a stay-at-home parent or even working part time. This is a strong chance that not enough NI contributions would have been paid through employment to make it a qualifying year.
Don't worry about having to repay the child benefit if you do earn more than £60,000. You can simply call HMRC and elect not to receive it; this is very different to not claiming it.
You can also backdate a claim for child benefit by up to three months. So if you are in this position you should claim without delay.