High income child benefit charge: A chance to claim for missed national insurance credits
By Chris Campbell, Head of Tax (Tax Practice and Owner Managed Business Taxes)
24 January 2024
We summarise the government’s latest announcement on the new national insurance credit, which may benefit those affected by the high income child benefit charge.
The introduction of the high income child benefit charge (HICBC) from January 2013 restricted the child benefit claim for households where a taxpayer has an adjusted net income of more than £50,000 and either they or their partner receive child benefit for at least a week in the tax year. The HICBC charge applies to the partner with the highest adjusted net income, in the form of a percentage charge based on the adjusted net income above £50,000 of the higher earning partner. The child benefit is fully withdrawn where the higher earning partner has adjusted net income of £60,000.
For households affected by HICBC, many will prefer to not receive child benefit payments instead of receiving child benefit and then repaying this as an additional tax charge to HMRC. By electing not to receive child benefit, the claimant would still receive national insurance credits as if they were receiving child benefit, without physically receiving the money.
Prior to HMRC introducing the online child benefit claim option, opting out of payments while receiving child benefit was a complicated and time-consuming process. But simply not claiming child benefit in the first place could have been detrimental to the child benefit claimant’s national insurance credits for the purposes of state benefits. It could also affect the ability for an eligible family member (below state pension age) to claim specified adult childcare credits when looking after a child aged under 12.
New national insurance credit
In its simplification update, the government confirmed that legislation will be introduced so that parents and carers who did not claim child benefit (and therefore missed out on the national insurance credits) can claim for a credit for the missed years. This should help avoid the issues that may otherwise be experienced with the ability to claim state benefits, particularly the state pension.
The government has confirmed that it will introduce secondary legislation to allow parents and carers who would have qualified for child benefit, but did not claim to claim a national insurance credit. This will be possible from April 2026. Initially there will be transitional arrangements so that claims can be backdated to the start of HICBC in 2013. In future, it will only be possible to make an application for six years following the end of the relevant tax year.
At this stage, it is unclear whether the new credit will deal with the ability to backdate specified adult childcare credits. Normally, it is necessary to wait until the 31 October after the end of the tax year to make a claim to transfer the national insurance credit to an eligible family member. We will continue to monitor any developments on this and keep you updated on what you need to know.
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