HMRC have recently admitted that over 200,000 parents receiving Child Benefit could be forgoing part of their future entitlement to State Pension.
You may take the view that the State Pension system will change by the time you reach retirement and so this isn’t an issue, but sensible advice is to use all the rules and systems to maximise your position whilst you can. Who knows the value of these entitlements in the future?
Child Benefit needs to be claimed by the person with child care commitments so that they qualify for National Insurance credits to be awarded in order to protect that non/low earner’s entitlement to State Pension. However, as a result of the High Income Child Benefit Charge which effectively recoups Child Benefit by imposing an income tax charge on individuals with income exceeding £50,000, such that an individual with income above £60,000 suffers a full clawback of Child Benefit, some couples have stopped claiming the benefit.
Sometimes the earner is the person registered for Child Benefit who isn’t entitled to credits as their income is above the earning factor for the year whilst there is a non-earner at home – you can transfer that credit entitlement, so parents can transfer National Insurance credits between themselves.
Households can either change the child benefit claimant from the earning parent to the parent with low-or-no income, or the earning parent stays as the claimant and just the National Insurance credits can be transferred to the low-or-no income parent.
You can register for entitlement to Child Benefit, and National Insurance credits, even if you then elect not to receive the benefit owing to the income of the higher earner being in excess of £50,000.
Should you be in this situation after 6 April 2010 please read the notes on CF411A HERE.
Should you be out of time with your claim, you can still submit a request explaining why you haven’t previously claimed and HMRC can still award the credits as long as you meet the transfer conditions.
For further advice on this subject please do not hesitate to contact me or your local Thomas Westcott contact.