Child benefit: don’t get caught

Olga Carter, Associate at Bulley Davey, explains how you can avoid getting caught out by a strange loophole in the child benefits system

The world of benefits and tax can often be confusing – what benefits are you entitled to? How do you access them? Are there any repercussions if you don’t claim certain benefits? When it comes to child benefits these questions become even more important. Many well-earning parents may decide not to register for child benefits, understandably feeling they don’t need it and that it might be better used by those who really rely on it. Yet many parents who do this are unknowingly setting themselves up for problems later down the line. A quirk in the child benefits system is seeing thousands of children, born since 2013, fail to receive their national insurance numbers.

This is the kind of unfortunate loophole that we sometimes come across in the benefits and tax system and, if you’re not aware of it, it’s easy to get caught. Essentially, if you or your partner share a home (married or otherwise) and one of you earns more than £50,000 and one of you is receiving child benefit – you may have to pay a tax charge known as the ‘High Income Child Benefit Charge’. If the income is between £50,000 and £60,000 then part of the child benefit you receive will need to be repaid. Above £60,000 it is all repayable. This is paid back at the end of each tax year through self-assessment by the high-earner.

For example, in many cases it is the mother who receives child benefits, but the father is the high earner, so he will have to pay the child benefit charge. As a parent you have a few options. You can register for child benefit (knowing that some or all of it may need to be repaid). You can register but opt out of actually receiving benefits – you’ll see why this is important shortly! Or you can choose not to register for child benefit at all, which is where our problem arises.

Many families where there is a ‘high-earner’ don’t claim child benefits, which is absolutely fine. But because of this they don’t see the need to register. You should still fill in the child benefit claim form and then simply opt out. This is because registering will ensure you get National Insurance credits towards a state pension while at home with the children – and will ensure your children will get their national insurance number ahead of their 16th birthday, allowing them to work and apply for student loans.

The number of registrations for child benefits has dropped by over 500,000 since 2013, when the High Income Child Benefit Charge came into force. This means thousands of children and parents may have to prove their identity and apply for a National Insurance number separately when the child is 16. So, it’s easy to miss details like these but our advice is always to register – and keep HMRC informed if there are any changes to your circumstances, as this will potentially affect your child benefit. The HMRC website is the best place to stay updated on changes like these, where you will also find a helpful Child Benefit Tax Calculator.

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