Hundreds of thousands of parents are missing out on a benefit that could help boost their finances and even bring in extra cash in retirement, new HMRC data has revealed.
There are now 214,000 parents eligible for Child Benefit but not claiming it, the data obtained by Sky News shows, an increase of 66,000 from just five years ago.
Child Benefit pays £26.05 a week, equalling £1,354 a year, for the eldest or only child. For each additional child, this drops to £17.25 a week, equalling £897 a year (this is not capped by the two-child benefit cap).
It can be claimed by the adult responsible for a child under the age of 16, or under 20 if still in education or training. It is paid into the claimants bank account every four weeks automatically.
The payment is not means-tested, meaning it can be claimed regardless of income. However, there are some extra rules to be aware of for high-earners.
The “high-income child benefit charge” means that if one parent’s income is above £60,000, then they will become responsible for paying a tax charge. It effectively withdraws the payment at a rate of one per cent for each £200 earned over the threshold, meaning it is completely lost for someone earning around £80,000.
This charge is paid through a self-assessment tax return form.
However, this does not mean it is not worth looking into, as there is also a massive post-retirement boost that claiming Child Benefit can bring.
A parent will automatically get national insurance credits if they claim Child Benefit for a child under 12. These credits will count towards a state pension, reducing the amount of time that needs to be spent in work to build up national insurance contributions.
A person needs to have 35 years of qualifying national insurance contributions to get the full state pension in retirement.
The Child Benefit-linked national insurance credits can even be transferred to a partner if they are not needed by the claiming parent. Someone who would be affected by the high-income charge can also opt out of Child Benefit, but still request these credits.
The credits can be very beneficial for a parent who takes time off work to care for their child, even if just for a year. One year of national insurance contributions can increase the state pension by £6.58 a week, or £342.16 a year.
This means that for a parent who doesn’t work until their child starts school at the age of four, they could miss out on £1,368 a year in retirement by not claiming.
An HMRC spokesperson said: “Around 7 million families are getting a financial boost from Child Benefit and we’re constantly promoting its benefits through a range of channels and partnerships so that more families claim what they’re entitled to.”
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