Parents, mostly mums, who chose not to receive child benefit payments because of the High Income Child Benefit Tax Charge also, unintentionally also waived goodbye to National Insurance credits that count towards their state pension. For some, the loss is state pension could be as high as £20,000 according to Royal London research.
The High Income Child Benefit Tax Charge, which has long been criticised for being unfair, means that once one parent starts earning above £50,000, they become liable for paying the charge.
For each £100 they earn above £50,000, they must pay back 1% of the child benefit received through the charge.
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Once they earn above £60,000, the child benefit must be paid back in full by completing a tax return. The highest earning parent must pay the charge by completing a tax return.
The charge is considered unfair as it focuses on a single individual’s income. It means that a household with a single income of £70,000 would have to pay back all of the child benefit received, yet a household where both parents work and earn £35,000 each would get to keep the entirety of the benefit - despite having a higher combined income.
While the unfairness of this is still being debated by the current government, a new measure from HMRC means those parents who opted out to avoid paying the charge and as a result missed out on National Insurance credits, can plug those gaps to help towards the state pension.
This is really important, since eligibility for certain state benefits are determined based on your National Insurance record. With the new state pension for example you need 10 qualifying years on your National Insurance record to receive anything at all, and 35 years to get the full amount.
Here’s what you need to know about reclaiming your National Insurance credits.
How to plug your National Insurance gap
If you have missed out on National Insurance credits because you decided not to receive Child Benefit, then you can plug the gap online from April 2026.
There will also be “transitional arrangements” in place to ensure that those who have been affected since the introduction of the High Income Child Benefit Charge in 2013 are able to claim.
In future, applications will be available for six years following the relevant tax year.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown said many people who opted out of child benefit did not realise doing so could impact their pension entitlement.
She described the new measures as “a welcome step forward in resolving a saga that has added unnecessary complexity to people’s retirement planning”.
John Fitzsimons has been writing about finance since 2007, and is a former editor of Mortgage Solutions and loveMONEY. Since going freelance in 2016 he has written for publications including The Sunday Times, The Mirror, The Sun, The Daily Mail and Forbes, and is committed to helping readers make more informed decisions about their money.
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