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HMRC chief grilled over child benefit National Insurance shake-up

HMRC chief grilled over child benefit National Insurance shake-up
Paloma Kubiak
Written By:
Paloma Kubiak

The Treasury Committee said it is “unconvinced” about the simplification of a tax policy allowing parents to plug historical gaps in their National Insurance record, while quizzing the HMRC chief over the three-year wait for the rule change.

The influential Committee said “questions remain” over changes announced by the Government in April 2023 allowing parents to retrospectively claim National Insurance credits if they were eligible for child benefit, but failed to claim at the time.

It would help ensure that people don’t miss out on their state pension entitlement as, under current rules, people need a record of 35 years for the full state pension.

The Committee questioned how HMRC would be able to reach those affected, as well as the three-year lead time. In January, an HMRC update suggested the backdating rules would apply from April 2026 – three years after it was first announced in a bid to tackle declining child benefit claim rates over the last decade.

Chair of the Treasury Committee, Harriett Baldwin, wrote to HMRC chief executive Jim Harra to ask whether an advertising campaign will run and whether HMRC will proactively encourage people to claim.

‘Earliest viable delivery date’

In response, Harra wrote: “Child benefit claim rates have reduced in the last decade, meaning individuals may have unintentionally missed out on the National Insurance credit associated with claiming child benefit. This measure provides a route for parents who have missed out on their state pension entitlement to fill gaps in their National Insurance records. The measure will be delivered through HMRC online and app services to ensure a good customer journey, minimising the number of times individuals need to interact with HMRC.

“The Government wants to provide certainty as soon as possible to affected individuals that they will be able to claim the National Insurance credit and fill gaps in their state pension, so has prioritised announcing policy details in advance of implementation. Since the initial announcement in April 2023, HMRC and Department for Work and Pensions (DWP) have been working closely together to develop and agree the detailed policy framework for the credit.

“Implementation of the credit will depend on both passing legislation and IT system development, and our work undertaken so far on IT development suggests April 2026 is the earliest viable delivery date.”

Harra confirmed that individuals will be able to claim the National Insurance credit for prior periods dating back to 2013, “meaning they should not be disadvantaged by this implementation timeline”.

“In relation to communications with eligible customers, HMRC cannot identify individuals who may have been eligible for child benefit but did not claim. This is because, without a child benefit claim, we cannot establish who is responsible for a child and hence who may be eligible for child benefit.”

He added: “However, HMRC and DWP will promote the National Insurance credit via relevant channels, including using existing child benefit communications on Gov.uk, social media channels and through third-party parenting groups. HMRC and DWP will also engage with media commentators and all other relevant groups, to ensure that eligible individuals are aware that they can claim.”

‘Far too complex’

However, following the letter exchange, Baldwin wrote: “I’m afraid it appears there is still more work to be done.

“It’s extremely important that a concerted effort is made to reach those people who are at risk of missing out on their pension entitlement, and I was not encouraged by the department’s plans to use the most straightforward communications channels such as parenting groups. This could leave a significant gap of people who no longer have children below the age of 16 and therefore don’t engage with those channels anymore.

“I also remain unconvinced on this initiative’s merit as a ‘simplification’. As the Committee found last summer, the tax system is already far too complex. In its current form, this will likely place a further burden on individuals and HMRC – which we know is already feeling the strain.

“This is a good and important initiative, but HMRC should give this more thought or it is at risk of falling short.”

An HMRC spokesperson, said: “This change means parents will be able to claim important National Insurance (NI) credits going back to 2013 if they have not previously claimed child benefit.

“We are developing comprehensive plans to raise awareness of the change and to ensure parents don’t miss out on their state pension entitlement.”