Laura Suter, head of personal finance at AJ Bell, comments on the latest child benefit data from HMRC:
“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. Wage increases over the years mean that more families are hitting the £50,000 limit where their child benefit starts to be stripped away. It also means many more families are reaching the £60,000 limit where they lose the benefit entirely.
“The figures show a huge increase in the number of people who are claiming child benefit but not receiving the actual money, which means they have hit the £60,000 threshold but still want the National Insurance credits. A total of 683,000 families opted out of getting the payments, 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 are claiming the 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. The high income charge was set at £50,000 in 2013 and hasn’t been increased during that time – if it had increased in line with inflation it would be at £65,000 today. However, some of these families could likely benefit from claiming child benefit and not actually receiving the payment, but the system has become so complicated that many don’t understand what they are entitled to.
“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 announced additional childcare support for younger families in its latest Budget, but this will take years to rollout, leaving hundreds of thousands of families without the money they need to afford adequate childcare or stay in the workforce. A simpler move would have been to increase the high income threshold in line with wage growth, to ensure more families aren’t locked out from claiming.”
Source: HMRC
