The High Income Child Benefit Tax Charge was introduced from January 2013, and since then, the tax charge has applied to anyone with an income over £50,000 who claims Child Benefit – who whose partner does. While some people may not be thinking about their state pension at this time of their life, it may be that they should do so – and fast.
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This is because some people may opt to waive claiming Child Benefit, due to being affected by the High Income Child Benefit Tax Charge.
The charge is equal to one percent of a family’s Child Benefit for every extra £100 of income that is over £50,000 each year.
As such, if an individual’s income exceeds £60,000, the charge equals the total amount of the Child Benefit.
By waiving the payment, these people would therefore not need to pay the charge.
However, failing to fill out a Child Benefit claim form, on which a person can state they are waiving the payment, could have an impact on a member of the household’s state pension.
It would affect a lower-earning or non-earning partner, should there be one in the household.
Director of Public Policy at LEBC Group and Chartered Financial Planner, Kay Ingram, explained how the High Income Child Benefit Charge can impact a person’s state pension.
She told Express.co.uk: “State pension credits will be given automatically for those women who claim child benefit (£20.70 per week for the first child).
“This provides an automatic credit for National Insurance so state pension credits will continue to be earned, with each year being worth £250 annual state pension.
“Child benefit becomes taxable once partner or spouse’s earnings exceed £50,100.
“Many couples have waived payment of it to avoid tax without realising they are losing state pension credits.”
However, it is possible to reinstate the credits, as Ms Ingram detailed.
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She said: “To reinstate them the stay at home partner needs to claim Child Benefit but tick the box to waive payment of it, this will reinstate state pension credits.”
However, people in this situation may want to act sooner rather than later – as there is a time limit when it comes to backdating the claim.
“NI credits can only be backdated three months so those missing out need to act fast,” warned Ms Ingram.
The Gov.uk website explains that by claiming Child Benefit, a person can get National Insurance credits which counts towards their state pension.
Additionally, by claiming the payment, the child will automatically get a National Insurance number when they’re 16 years old.
“If you choose not to get Child Benefit payments, you should still fill in and send off the claim form,” the website states.
The form for claiming Child Benefit for one or more children is known as the CH2 form.Source: Read Full Article