HMRC Warning as Thousands of Families Are Losing £ 9,000 Annually Due to Child Support Regulations
At least 200,000 families lose thousands of pounds each year to child support schemes.
They have been warned that simple misunderstandings about how the system works can cost them dearly.
Child support is administered and paid by HMRC (Her Majesty’s Revenue and Customs), which BirminghamLive has verified on how people can avoid these costly mistakes.
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Families claiming child benefit can receive £ 21.15 per week for the oldest or only child and £ 14 for all additional children. But many people don’t bother to make claims if they believe their income will be too high to qualify.
And that’s a big mistake, as child benefit also provides social security credits for the state pension. So you could lose £ 9,000 a year in annuity payments (at current rates) if you don’t sort things out right away.
Many parents don’t know that there is a rule about child benefit that means you can get NI credits towards a state pension even if you don’t get any of the benefits.
Only one person can receive child benefit for one child. However, the household income of both partners is taken into account.
And if your individual (or your partner’s) income is more than £ 50,000, you will be taxed at the child benefit and will receive a lower amount. And once you or your partner make £ 60,000, you will lose all of your child support through taxes.
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But even if you lost part or all of your payment and let the hassle of filling out self-assessment tax forms just for little or nothing put you off, it is important to apply for it.
By applying for child benefit:
Even if your or your partner’s income is over £ 60,000 and you would lose all of the Child Support and receive nothing, you will still be building National Insurance credits while a claim is active. You can submit an application and request that it not be paid to avoid filling out self-assessment forms.
Simply fill out the child benefit application form available on the government website and tick the box that says you do not want to receive the payments.
This way, you will continue to contribute to a state pension that requires at least 10 years of social security.
Remember, you must have 35 qualifying years to receive the full State Pension, which is currently £ 179.60 per week or £ 9,339.20 per year.
The social security credits for child benefit will be paid until the youngest child is 12 years old, the HMRC said.
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In addition, families should ensure that the parent with the lower (or zero) income is the one applying for child benefit as they will then receive the NI credits for a pension.
The better-earning partner already pays NI towards the state pension through deductions on his pay slip.
For example, parents who stay at home who are at home with the children receive nothing in return for a pension if they let their working partner take over the claim to child benefit.
In April 2021, a Freedom of Information response from HMRC to Lane Clark and Peacock (LCP) showed that there are currently 200,000 couples for whom the “wrong” partner is applying for child benefit. With these couples, the higher earner receives child benefit.
As a result, the low-income (or non-wage earner) misses vital social security credits to secure their state pension. In most cases, the low-income earner is a woman, which means the decision to claim child benefit on behalf of the higher-income earner will further widen the gender pension gap, LCP said.
HMRC says not everyone who misses out on a loan experiences a reduced pension. Because they can build up the 35 years necessary for a full pension in the rest of their adult life.
But where they miss it, the loss could be substantial. A year too short would cost someone 1/35 of a full pension each week in retirement. This is £ 5 per week, £ 260 per year or £ 5,200 over a 20 year retirement, calculated under the LCP.
If only half of the 200,000 couples are affected this way, the combined loss could be £ 520 million in pension rights each year.
Steve Webb of LCP said, “Many couples may not realize that receiving child support on behalf of high earners rather than low income earners may not realize that they spend time caring for others.
“The majority of those who are missing out now are mothers with young children. It is simply unacceptable for them to receive a pension sentence as a result of child support and encourages people to check their NI records on where the wrong choices have been made in the past. “
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HMRC told BirminghamLive that there is a CF411A form on the government website that you can fill out to transfer NI credits to the low earning partner if the high earning parent is the one applying for child benefit.
Latest annual figures show that 7.2 million families in the UK are receiving child benefit, a decrease of about 71,000 from the previous year.
The total includes 684,000 families in the West Midlands, the fourth highest number of claims in the UK after London, the South East and the North West.
The decline in child benefit claims is attributed to a decline in fertility rates and disruption to claims caused by the effects of national barriers.
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