- Change will help simplify process for parents
- Child benefit remains complicated, with ‘high income’ charge threshold frozen at £50,000
- Some parents may be left with a gap in their NI record if they don’t claim…
- …although Laura Trott, now chief secretary to the Treasury, previously pledged to resolve the issue
AJ Bell director of personal finance, Laura Suter, comments on HMRC’s move to make child benefit claims available online:
“Allowing families to claim child benefit online will save time and make the process simpler. When you’re chasing around after children, dancing through Duplo and battling to get them to bed, the last thing you need is another bit of paperwork getting lost somewhere around the house.
“Child benefit is a tricky one to get to grips with, however, so don’t expect it to be entirely straightforward just because the process is now online. There are different rates and rules depending on how many children someone has, and whether both parents are living together as a family or they’ve separated.
“In addition, only some families are eligible, depending on their earnings. Once one partner earns over £50,000, the benefit is gradually eroded, eventually being revoked entirely for those earning more than £60,000. Unfortunately, it doesn’t matter what your household income is, so a family with a single earner paid £60,000 gets nothing, whereas two parents paid £50,000 each can claim the full amount.
“That £50,000 earnings threshold has been locked in place, despite rising wages – if it had increased in line with inflation it would be at £65,000 today. As a result the number of families getting child benefit payments has dropped to its lowest level since records began, with the continual freeze on the so-called ‘high income’ threshold hitting more and more parents.
“A total of 683,000 families opted out of getting the payments, according to the latest figures, accounting for 1.05 million children. If these families had been eligible they could have claimed £1.15 billion in additional support.
“On top of that, 43,000 fewer families were claiming child benefit altogether, when compared to the previous year. This is because they have hit the high income charge and no longer want to claim the money.
“Take-up of child benefit is particularly low among families of smaller children, with the pandemic meaning that more people are unaware they can claim or how to claim. The usual contact points with families were reduced to a minimum during lockdown, meaning that many new parents are unaware they could be entitled to support. As a result, non-working parents who could benefit from the National Insurance credits could be needlessly leaving a shortfall on their state pension record, leaving them poorer in retirement.
“The government has pledged to try and do something about this, promising to allow people – often mothers – to claim for any missed NI credits not allocated to them when they were looking after children and not working or claiming child benefit. However, no concrete information has yet been forthcoming, and it will doubtless involve more form-filling and complexity for parents to try and get their heads around in any case.”
