Child benefit: why everyone should claim – even if you earn over £50,000
Many people don't realise that it is important to register for child benefit even if you earn over the £50,000 threshold.
This is because the benefit links to different parts of the HMRC system and not registering can leave parents and their children at a disadvantage.
What is child benefit?
Child benefit is paid to the parents or guardians of children at the rate of £21.80 per week for the first child and £14.45 a week per child for any more children.
The payment begins from birth until the age of 16 or under 20 if the child is in approved full time education or training. Claims can only be back dated three months so it is a good idea to register as soon as your child is born.
The benefit will stop is a child starts doing paid work for more than 24 hours a week or they start an apprenticeship or begin receiving certain benefits directly.
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Everyone is eligible for the benefit but if one parents earns over £50,000 they must pay back 1% of the child benefit for every £100 they earn over this. This means there is a taper up to £60,000.
Parents can have a combined income of up to £100,000 and be eligible for the full entitlement as long as neither one has an individual income over £50,000.
Child benefit can only be paid to one person so in the case of divorce or separation it will go to the main carer.
What if I earn over £50,000?
If you earn between £50,000 and £60,000 it can be worth registering for and claiming the benefit but you will have to submit an annual self assessment and pay back a percentage of the benefit via tax.
Any charge you pay is based on your net income for income tax. Allowable deductions include pension contributions and gift aid donations. This means if you earn £55,000 gross but pay £5,000 in pension contributions you will still be eligible for the full child benefit entitlement.
The best way to work out what you are eligible for is to use the government child benefit tax calculator.
"If you register for child benefit from the beginning then all of your details are there. If your earnings go down and you become eligible for child benefit then it is just a quick phone call to get you back on the system. It makes it much quicker," explained Mandy Garner of workingmums.co.uk.
What if I earn over £60,000?
Even if one parents earns over £60,000 it may still be worth claiming for the benefit and opting not to receive the payments. This means you will avoid a tax charge but will still get the entitlements.
By claiming for the benefit you will ensure that you receive class 3 national insurance credits which count towards the state pension. For each year that a parent is registered for child benefit for a child under 12 this equates to one qualifying year for state pension purposes.
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"This is particularly important if you are not working or are working part time therefore you are below the national insurance threshold for contributions to the state pension. You need 35 years contributions for the full state pension," said Garner.
This is particularly important for women with the gender pension gap currently standing at 37.9%. Women are far more likely to have career breaks to care for children or elderly relatives and miss out on pension contributions as a result. This is why claiming for child benefit when you are not working is so important.
Claiming for child benefit also ensures that your child automatically receives their national insurance number before their 16th birthday rather than having to request it through a different administrative process.
Finally, for people bringing up a child whose parents have died, it is important to claim child benefit in order to have access to the guardian's allowance.
Watch: When should I start paying into a pension?