Parents opting out of Child Benefit still need to protect State Pension rights
Parents have until this Sunday to decide whether to stop receiving the benefit, but according to a new report, many are unaware of the need to protect their state pension rights.
This could potentially affect the 155,000 people who have already decided to stop receiving child benefit from April 2014.
According to the report, non-working individuals who receive child benefit for a child under 12 are entitled to receive national insurance credits (NICs) which build entitlement to the state pension.
Where a high-earning parent decides to not receive child benefit payments as a result of the introduction of the new High Income Child Benefit (HICB) charge, it is important that a child benefit claim form is still completed.
The entitlement, rather than the payment, of child benefit will ensure that NI credits continue.
Certain individuals being taxed through the Pay As You Earn system (PAYE), will also be required to register for self-assessment and to complete a tax return.
Even where the charge is collected through a change to an individual’s tax code in future years, they will still need to complete a tax return.
HMRC has recently written to all families expected to be affected by these changes; however there have been reports of families who have yet to receive these letters.
These changes are significant in terms of income and cash flow for families but also in adding uncertainty to their tax affairs.
Many taxpayers will be faced with the costs and complexities of completing a tax return for the first time.
The changes are expected to affect 1.2m families, 70% of which will lose the benefit in full.
A further 330,000 families will lose a proportion of the benefit.
The average loss of benefit is expected to be £1,300 per year, saving the government £1.5bn in 2013/14 and £1.7bn in 2014/15.