BENEFIT BLOW
Warning for parents over little-known loophole that could stop child benefit payments
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PARENTS are being warned over a little-known loophole that could stop their child benefit payments.
Child benefit is a valuable income top-up for parents, worth £25.60 a week for an eldest or only child and £16.95 a week for any other children.
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It's currently claimed by 7.7million families to help support 13.2million children.
However, not everyone is eligible for the payment, and if you hit the child benefit taper, you'll need to start paying some of your child benefit back.
Robert Salter, director at accounting firm Blick Rothenberg, said: "Families looking to claim child benefit, should be aware of the child benefit clawback.
This is officially known as the high-income child benefit charge (or HICBC for short), which is applied when the "adjusted net income" for one parent or partner in the family is above £60,000 per annum.
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Anyone earning over £80,000 is not eligible for child benefit and has to pay all of the benefit back if they make a claim.
However, Robert has issued a warning for parents about how HMRC defines the term "adjusted net income."
You might assume that the HICBC is based only on your annual salary shown on your payslip.
However, Robert said: "It is important that families understand that the term adjusted net income is not just their salary or wages (or profits, if they are a sole trader).
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"This also related to any taxable benefits-in-kind which they might receive from their job."
For example, this could include private medical insurance, a company car or car fuel benefit.
"These benefits can be a particular 'trap' for the unwary," added Robert.
WHAT ELSE COUNTS?
Robert also noted that any taxable investment income - whether dividends, bank interest or rental income - can also be adjusted net income for the purposes of the HICBC.
He said: "Spouses with different levels of income - say one earns a salary of around £60,000 per annum and the other earns a much lower salary (or is not working) – should consider whether such income should be in the name of the higher earner, joint names or solely in the name of the lower-earning partner."
The HICBC applies to the higher-income partner in a couple, irrespective of the income of the other partner.
How much is child benefit worth?
THERE are two child benefit rates, one for the eldest child and another for younger children.
- You get £21.15 per week for your eldest or only child (£1099.80 a year)
- You get £14 for each of your other children (£728 per year, per child)
- You get the money for each child under 16 (or under 20 if they stay in approved education or training)
- If families split up, how much you'll get for each child depends on how you claim.
- If you have 2 children and one stays with you and the other stays with your ex-partner, you’ll both get £21.15 a week for each child.
- If one parent claims for all the children, you get £21.15 for the eldest and £14 for each younger child.
- Only one household can claim for each child
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If you already earn well over the HICBC, you might think it's not worth applying for child benefit.
However, if you have a partner who is on a low income or out of work, you could be forfeiting valuable National Insurance credits.
When you make a claim for child benefit for a child under 12, you receive these credits for free.
NI credits fill in any gaps in your record and work by protecting the amount of State Pension you receive when you retire.
The reason NICs are so important is because you need 35 NIC years to receive a full new State Pension.
By not claiming child benefit, thousands of parents are forgoing these NI credits and damaging their state pension entitlement in retirement.
If you don't have enough qualifying years for a full state pension, adding one extra year to your NI record could boost your retirement by £300 a year.
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However, even if a family's adjusted income is over the child benefit threshold, you can claim these NI credits without also claiming child benefit payments.
When you apply for child benefits online, you can declare if you want to receive child benefits or just the NI credits at question number 62.
How do I claim child benefit?
YOU can make a claim for child benefit 48 hours after you've registered the birth of your child, or once they move in with you.
It can be backdated by up to three months if you don't claim it straight away.
Applying is straightforward and can be done in minutes onlnine.
Parents with a newborn baby should make a claim online as soon as possible and could then receive their first payment in as little as three days.
Only one person can get child benefit for a child, so you need to decide whether it's better for you or the other parent to claim.
The person who claims will get National Insurance credits towards their state pension if they're not working.
National Insurance credits build up your entitlement to the state pension.
You can make a claim online by visiting www.gov.uk/child-benefit/how-to-claim.
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