High Income Child Benefit Charge and State Pension

Last month we looked at tax planning to minimise or eliminate the High Income Child Benefit Charge to keep both husband and wife (or civil partners) looking after a child below the £50,000 income threshold.

Where the income of one of the individuals exceeds £60,000 and as a result the whole of the child benefit is taxed, a couple may be tempted not to claim child benefit at all. However, there is a danger that this may limit the amount of State pension and other benefits that can be claimed at a later date.

Under current rules individuals must make National Insurance Contributions (NIC) for 35 years to receive a full State Pension.  It is possible to claim Child Benefit but to choose not to receive the actual payments.  This means that there will be no High Income Child Benefit Charge to pay.  But the individual will still receive the associated NIC credits for that year and,as a result, protect their State Pension entitlement.

Note that grandparents, who have ceased working and are looking after their grandchildren, may also claim NIC credits which will count towards their 35 year State Pension contribution history. Remember that you can check your National Insurance record online to see:

• what you’ve paid, up to the start of the current tax year (6 April 2019)
• any National Insurance credits you’ve received
• if there are any gaps in contributions or credits which may mean that some years will not count towards your State Pension
• if you can pay voluntary contributions to fill any gaps and how much this will cos

You can check your State Pension online at any time for a forecast of how much you could get. The service will also confirm when you will reach State Pension age, under the law as it stands. Note that Government proposes to increase the State Pension age to 68 from 2037.

Tax planning to minimise the High Income Child Benefit Charge

Photo by Susan Holt Simpson on Unsplash