High Income Child Benefit Charge and NICs

The High Income Child Benefit Charge (HICBC) rules have a number of anomalies, for example:

• A household with two earners earning £50,000 does not suffer a charge, a household with one earner earning £60,000 does.
• The person who pays the charge need not be the person who receives the benefit
• In some circumstances the charge can give rise to a marginal rate of tax of over 80%

To avoid the hassle of the HICBC a number of people have decided not to claim Child Benefit and may be unaware that they may be affecting their entitlement to the new State Pension. Entitlement to the pension depends upon making National Insurance contributions for at least 10 years and the maximum pension requires 35 years’ contributions. A person caring for a child under 12 is entitled to National Insurance credits but to get them they must actually claim Child Benefit. Claiming Child Benefit does not mean that you have to receive it and suffer the HICBC, the claim form includes an option to tick a box “I don’t want to be paid…..” (the box is at section 64 of 74 on the form).

Just to repeat the numbers, you need 10 years’ National Insurance Contributions to earn entitlement to the new State Pension – if you care for a child for the first 12 years and claim Child Benefit you will be credited with 12 years’ National Insurance Contributions. Sound complicated? We can help. Why not give your local AIMS Accountant a call to discuss further.

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