health2024-05-22 03:54:552447

Should you claim child benefit? What it's worth

Child benefit was once a simple univeral payment that went to all those with children but a shake-up by former Chancellor George Osborne turned it into a complicated part of the tax system.

The good news is that the rules governing how child benefit is taken off higher-earning parents have been eased - and more can now get the payments of £25.60 per week for a first child and £16.95 for additional children.

We explain what you need to know about child benefit, whether you should take it - and why new parents must watch out for traps that can catch them out and lose state pension.

Child benefit: Payments are made every four weeks on a Monday or Tuesday

Child benefit - what's it worth

Child benefit is currently £25.60 a week for the eldest and £16.95 a week for each additional child.

It is paid if you are responsible for a child who is under 16, or under 20 if they are still in school or on an approved training course.

Only one person can claim child benefit for any individual child, but there is no limit on the number of children for whom you can receive payments.

Controversial income thresholds that bar better off parents from getting child benefit were introduced in 2013, although these were recently eased and a further relaxation in the rules is due in 2026.

The changes more than a decade ago also caused problems because of a little-understood link between claiming child benefit and the state pension.

This has created holes in some parents' National Insurance records, but the Government has now promised to fix this issue too.

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Applying for child benefit

You can make a claim for child benefit or add another child to your claim at gov.uk, either online or by downloading and filling in a printed form.

Payments are made every four weeks on a Monday or Tuesday, but you can be paid weekly if you are a single parent or get other benefits, like Universal Credit.

You are expected to report anything that might affect affect your child benefit, such as household changes or if you move abroad.

If a family split ups, only one person still gets £25.60 a week for the eldest child, but if there are two children who live with different partners they will both get £25.60 a week. For other children, the amount stays at £16.95.

If you have a blended family, only the eldest child qualifies for the £25.60 rate and any other children the £16.95 rate.

Claiming child benefit for a child means they will automatically get a National Insurance number shortly before they turn 16.

Until a child is 12, the claimant can also receive free National Insurance credits towards their state pension - more on this below.

What are the child benefit rules for higher earners

In 2013, the High Income Child Benefit Charge was introduced, which effectively made better off parents ineligible for child benefit payments.

This removed child benefit if one parent earned between £50,000 and £60,000 via the high income child benefit charge, creating high marginal tax rates. Once earnings reached more than £60,000 child benefit was gone entirely.

After years of campaigning by parents and websites such as This is Money, the rules were changed in the Budget, but only to bump up the thresholds for removal to between £60,000 and £80,000.

Even if parents will lose child benefit, they should still apply, however, and either tick the relevant box to opt out of getting the payments, or take the money but the higher earner should fill in a tax return to have it clawed back.

This is because registering gets you credits towards the state pension if you need them, and your child will be in the system to receive their NI number.

Until recently, child benefit was reduced for those earning £50,000-plus a year, or wiped out entirely for those earning £60,000-plus.

But the rules were eased in April this year, and now child benefit starts to be phased out if one member of the household earns £60,000, and payments stop altogether at £80,000.

This means many more parents can now qualify for child benefit and some of those who are not taking it should start taking it again.

However, if the £50,000 threshold had been hiked with inflation it would already be £67,000, and if it had gone up in line with average wage growth it would be nearly £72,000 by now.

The rules came under fire from the start because they penalise families in which one parent earns just over £50,000, but those where both parents earn just under that amount still get child benefit paid in full.

The Government has promised to address this by 2026, when the system will change to assessing household income.

The child benefit income rules create high marginal tax rates for parents, which since the change in thresholds in April have now shifted further up the income scale.

Those who can afford to spare some of their earnings can pay more into their pension to reduce their income below the child benefit threshold.

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How holes in state pensions will be fixed

Parents who do not qualify for child benefit and therefore don't claim it can miss out on valuable National Insurance credits.

At the present state pension rate of £11,500 a year, each credit is worth £329 a year, or £6,500 over a 20-year retirement.

This has become a problem because the number of families claiming child benefit has slumped since the controversial overhaul in 2013.

You get the credits for years when your children are under 12. However, many new parents are aware there is a connection between child benefit and how much state pension they could receive decades from now.

After shunning parents' pleas for years, the Government has promised to let child benefit-hit parents repair state pension records by creating a new National Insurance credit they can apply for from April 2026.

But there is little detail so far, no guarantee take-up of these new credits will be sufficient to fix the problem, and meanwhile the pending election could cause delay.

Until the fix is implemented, parents are being advised to submit a claim for child benefit but tick a box to opt out of receiving payments, and only get state pension credits.

Anyone who has not done so yet is urged to do so now, rather than wait for the Government to fix the issue by offering new credits in several years' time.

For now, your state pension credits will only be backdated for three months when you belatedly register, but you will be in the system and the hole in your record will stop getting bigger.

Parents who miss out on credits might make them up before retirement by working and paying National Insurance for enough years, or qualifying for them in some other way such as being a carer.

But this is not guaranteed, and parents will not necessarily be well off in their own right, or still married to a partner whose high earnings disqualified them from child benefit, by the time they reach retirement age.

What if the 'wrong' partner applies for child benefit?

It's important a parent who is not working fills in the child benefit form.

This is because the claimant gets the valuable credits towards the state pension, but these are worthless to someone employed and already paying enough National Insurance.

Many families make this mistake, and parents can swap credits between them if the one who originally claimed child benefit doesn't need them to boost their own state pension record.

There is a time limit on when parents are meant to apply to do this retrospectively - they are supposed to apply before the end of the following tax year to swap each separate credit.

However, one couple discovered there is a loophole for late NI swap applications, provided you make a strong enough case to the taxman - setting an example other parents can follow.

They successfully argued to HMRC they were unaware his filling in the form could result in her losing huge sums in state pension in old age.

HMRC has said that it will accept late applications from couples wanting to transfer credits, though only if they can persuade it the delay is 'reasonable in the circumstances' and meet all other conditions.

It's likely that most couples could credibly say they had not understood the obscure link between who applies for child benefit and the state pension.

Here are the application details:

How to swap state pension qualifying years after 2010

How to swap state pension qualifying years before 2010

If you apply to swap and are refused, please contact us as we will try to help. Email [email protected] and put CHILD BENEFIT in the subject line.