Child Benefit: Why new parents should register
14th March 2019
Since 2013 an individual who has taxable income of more than £50,000 has incurred a tax charge if they or a partner they live with claims Child Benefit. The tax charge means that once an individual’s income exceeds £60,000, the full amount of Child Benefit received effectively has to be repaid, so many new parents see little point in registering for the benefit in the first place. There are, however, differences between stopping payment by disclaiming Child Benefit and simply not registering with the Child Benefit Office, which can create problems for the future.
Where an individual who is not working registers for Child Benefit but subsequently chooses not to receive payments (if, for example, their partner earns more than £60,000), that individual will still receive credits on their National Insurance record until the child reaches the ages of 12, which will then count towards qualifying years for State Pension purposes. Without registering for Child Benefit, these credits may not be available.
A further issue arises when an individual is self-employed. Due to the variable nature of business profits, it is possible that in some years the individual’s income will be well over £60,000 but in other years may drop below this figure. In those tax years where the individual’s income is less than £60,000 the tax charge will be lower than the Child Benefit entitlement and so it is therefore beneficial to claim the payments; however, if the individual has not previously registered for Child Benefit, arrears can only be claimed for a maximum of 3 months from the date of claim. Where Child Benefit has been disclaimed, an individual can backdate a claim to start receiving payments for up to 4 years, so payments can be claimed for earlier tax years once business profits for those years have been established.
We would recommend registering for Child Benefit as soon as a child is born. Parents then have the option to stop receiving payments where they or their partner would be liable to the High Income Child Benefit Charge.