Child Benefit

Child benefit is the Government's way of acknowledging the costs involved in raising a child. It's paid monthly to anyone responsible for children under the age of 16 (or under 20 if they stay in approved full-time education or unpaid training). You can also get child benefit for an extra 20 weeks in some circumstances (for example, if your child joins the armed forces). 

Who can get it?

You'll usually qualify for child benefit if the child you're applying for lives with you, or if you're paying at least the same weekly amount as the benefit towards looking after them. For example, you might pay for clothes, food, pocket money or birthday and Christmas gifts. This includes grandparents, adoptive parents and some foster parents.

If two people are responsible for the same child, only one will get the payment. Parents can decide between themselves who receives it – otherwise, HM Revenue & Customs (HMRC) will decide. HMRC will give the child benefit to the parent the child lives with the most.

By claiming child benefit, you will also earn national insurance credits, which count towards your state pension. You need 35 years' worth of national insurance credits to receive the full state pension, so this is especially important if one of you is a non-earner or earns less than £118 a week - the amount you need to get national insurance credits.

If you are not working or earning under £118, claiming child benefit effectively lets you earn national insurance credits you wouldn't have otherwise have earned. HMRC reckons 200,000 parents are losing out in this way because their partner with a higher income, not them, is registered for child benefit.

You can claim child benefit as soon as you've registered the birth or the child has come to live with you. It can take up to 12 weeks to process your claim and can only be backdated three months.

Individually, if you (or your partner) have an income of £50,000 or more a year and your household's receiving child benefit, the person with the 'high income' may have to pay a tax charge – a sliding amount known as the 'high income child benefit charge'.

This means for every £100 you receive above £50,000, you'll pay back 1% of the maximum amount of child benefit you're entitled to. So if you get £55,000, you'll pay back 50%. Once you have £60,000 or more coming in, the charge you'll pay back is 100% of your entitlement, essentially meaning you won't get any benefit.

If you or your partner, or you both, receive income above this threshold, the one getting the most MUST fill in a self-assessment tax return – even if you're already paying tax via your employer in the pay-as-you-earn system. Bear in mind that income doesn't just mean earnings. It can be made up of other revenues, eg, maintenance or rental income.

You'll also have to pay the charge if someone else is claiming for a child who's living with you – as long as they pay at least the equivalent of the weekly amount of child benefit towards taking care of them. This can be in cash or in kind, eg, food, presents and clothing.

If you're not sure if you're liable to pay the tax charge, use the Government's Child Benefit Tax Calculator to see if, and how much, you have to pay.

You'll have to register for self-assessment and send in a tax return every year. If you're not sure you've enough income to pay the charge, it's probably a good idea to register anyway. 

If you don't know if your partner is receiving child benefit, or has a higher adjusted income than you, eg, because you live apart or have separated, you can write to HMRC and ask. It will just tell you "yes" or "no" – you won't get any financial details. You can only do this for a former partner if your relationship ended within a year of the tax year you want information for.

Can I avoid paying the high income benefit charge?

Even if your income is above £50,000, you might be able to swerve the charge. That's because it's based on your 'adjusted income' – so if you pay any tax-deductible expenses or make pre-tax pension contributions, these might take you below the threshold, or at least lower how much you may have to pay. For example...

If Peter wasn't making any pension contributions, he'd have to pay the charge, as his before-tax income would be over the threshold. 

If you're thinking of claiming and worry you may need to pay the tax charge, you could keep the money in a separate savings account. That way, you'll be covered if you need to pay the charge and anything you get to keep is a bonus. You'll also earn interest on the money. See our Top Savings Accounts guide for more details.

If your income is £60,000+, it's still worth registering for child benefit

If you or your partner has an income of £60,000 or more, it's still worthwhile filling in the child benefit form and registering your entitlement – even if you opt out of actually receiving the benefit itself. Doing so has several advantages:

• You'll get national insurance credits, which count towards your state pension. You need 35 years' worth of national insurance credits to receive the full state pension, so this is especially important if one of you is a non-earner or makes less than £166 a week (which is when you'd start to pay national insurance contributions). HMRC reckons 200,000 parents are losing out in this way because their partner with a higher income, not them, is registered for child benefit.
  
  
• It will ensure your child is registered to receive a national insurance number shortly before they turn 16.

HMRC has refunded £1.8m in fines over 'failure to notify' fees

HMRC has issued refunds worth £1.8 million to almost 5,000 families who were issued so-called 'failure to notify' penalties for the tax years 2013/14, 2014/15 and 2015/16.

When the high income benefit charge was introduced in 2013, many parents with an income of more than £50,000 weren't aware that they had to notify HMRC that they earned enough to pay the tax charge, and, as a result, were charged the penalty fees.

Anyone who was due a refund has now received it. Read more about this in our MSE News story.