Should I Register for Child Benefit as a High Earner?
Have you registered for Child Benefit? If you’re a high-earning parent or carer you may not see the point in claiming, due to the High-Income Child Benefit Charge (HICBC). However, registering for Child Benefit has a hidden advantage, even if you pay the HICBC. If you’re looking after children at home, and aren’t paying National Insurance, Child Benefit can generate credits towards your State Pension.
Child Benefit registration will also ensure that your child/ren receive a National Insurance number when they turn 16. If you’ve nominated a guardian in your Will, they can also receive Child Benefit in addition to the Guardian’s Allowance.
What is Child Benefit and the HICBC?
Child Benefit is paid at:
– £20.70 per week for your first child,
– And £13.70 per week for every child thereafter.
If you or your partner earn more than £50,000 a year, then the HICBC applies. This is a 1% charge of every £100 of Child Benefit received, that exceeds £50,000. Where both persons earn more than £50,000, the partner with the higher income experiences the charge. This is often not the person who received the Child Benefit.
It’s worth noting that registering for Child Benefit payment is still worthwhile where income sits between £50,000 and £60,000 – as the HICBC charge will be lower than the payment received. Many parents ring-fence the HICBC charge amount in a separate account, to ensure they always have available funds to pay the tax.
Registering for Child Benefit to Receive State Pension
In summary, every year of Child Benefit received (for a child under 12) gives you one year of qualifying State benefit – such as State Pension. This is through the automatic receipt of Class 3 National Insurance credits. To gain the full single-tier State Pension, you’ll need 35 qualifying years – and a minimum of 10 for the reduced State Pension.
What Happens if I Don’t Register?
If you don’t register for Child Benefit, you could miss an automatic entitlement of 12 qualifying years (at least).
Registering is even more important if:
– You’re a stay-at-home parent
– Or you work part-time,
– And don’t pay sufficient Class 1 or Class 2 National Insurance contributions to make a year qualify.
What Happens if I’m Not Entitled?
You don’t need to worry about paying back Child Benefit if you’re not entitled. Just register, and choose not to receive the payment, by contacting HMRC online or your local Child Benefit office.
Want to protect your children’s future? If you’ve nominated a guardian in your Will, they can still claim the Guardian’s Allowance, even if they decide not to be paid Child Benefit.
What Happens if My Situation Changes?
If your circumstances change and your income goes below £50,000-60,000, it is possible to restart payments of Child Benefit. However, be aware that claims can only be backdated by three months.
Where you’re sure that income will stay the same or accrue, it’s important to plan for your children’s future – especially if wealth is likely to exceed £1 million. By getting advice on Inheritance Tax, you can save them future worry, and keep more for your family.
Get Tax Advice
It’s never too late to plan for the future, especially with professional advice. Either arrange your free consultation here, call us directly on 01743 562430, or email hello@mercianaccountants.co.uk.
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