Child Benefit was first introduced in April 1977 and since then, has supported parents with the cost of raising a family.
The payments typically increase with inflation and in the 2024/25 tax year, you could be entitled to £25.60 a week for your first child and £16.95 a week for each additional child.
You might use this money to help pay for clothes, groceries, family days out, or anything else your children need.
Additionally, claiming Child Benefit may mean that you are eligible for National Insurance (NI) credits in years when you weren’t working but were caring for a child. This could increase the amount of State Pension you receive in later life.
According to the UK government, 7.7 million families were claiming Child Benefit on 31 August 2022. Yet only 7.1 million households were receiving payments.
This is likely because of the “High Income Child Benefit Charge” – a tax charge that incrementally reduces the amount of Child Benefit you’re entitled to when you or your partner earns over a certain threshold.
Fortunately, the chancellor announced changes to this tax charge in his 2024 Spring Budget and this could mean some people receive more Child Benefit.
Read on to learn how these changes to Child Benefit rules could affect you.
The earnings threshold for the High Income Child Benefit Charge increased to £60,000 on 6 April 2024
In the 2023/24 tax year, you would trigger the High Income Child Benefit Charge if you or your partner earned £50,000 or more.
Bear in mind that it’s individual income that matters, not household income. For example, if both of you earned £49,999, you wouldn’t be affected. Yet, if you earned £51,000 and your partner didn’t have an income, you would trigger the tax charge.
If you triggered the charge, you would lose 1% of your Child Benefit for every £100 you exceeded the threshold. As a result, if you earned £60,000, the tax charge would equal 100% of your Child Benefit payments.
Consequently, you wouldn’t be entitled to any Child Benefit.
If you triggered the charge, you could claim the benefits and then repay them via self-assessment or choose not to receive the payments at all.
Fortunately, on 6 April 2024, the threshold for triggering the High Income Child Benefit Charge increased to £60,000. Additionally, the charge is now 1% for every £200 you exceed the threshold.
This means you can earn up to £80,000 before the charge equals 100% of your payments.
According to the Guardian, somebody who has two children and earns £60,000 a year will be £2,212 a year better off as a result of the change. The gain increases to £3,094 if you have three children.
This is a significant sum that could help you cover rising living costs or contribute to savings and investments for the future.
The government announced plans to move to a household income system from April 2026
The individual threshold for the High Income Child Benefit Charge has been criticised as unfair by many.
Under the current system a household with two parents earning £59,000 each – giving them a total income of £118,000 – receive its full Child Benefit. However, a single parent earning £61,000 would lose some of their benefits.
Fortunately, the government announced plans to move to a household income system from April 2026 onwards. This could make the High Income Child Benefit charge fairer, but there are no guarantees that the change will happen.
There will likely be an election in the second half of 2024 and if a new government comes into power, it might alter the policy.
Additionally, some critics believe that it will be difficult to implement a household income system, so the government may struggle to meet its April 2026 deadline.
You may benefit from claiming Child Benefit even if you won’t receive any payments
If you’re not entitled to any Child Benefit payments because you or your partner earn more than £80,000, you might decide not to claim at all. However, you may still want to claim as it could affect the amount of State Pension you receive in later life.
In 2024/25, the full new State Pension is £221.20 a week. You receive these payments for the rest of your life, so your State Pension could provide a valuable supplement to your other retirement savings.
However, to receive the full amount, you need 35 “qualifying years” on your NI record.
A qualifying year is any year in which you:
- Were working and paid NI contributions (NICs)
- Received NI credits – if you were a parent or carer, for example
- Paid voluntary NICs.
If you aren’t working, you are entitled to an NI credit for any year in which you were caring for a child under the age of 12.
However, you only receive these credits if you claim Child Benefit, even if you are affected by the High Income Child Benefit Charge.
As such, if you or your partner earns more than £80,000, it could still be beneficial to claim Child Benefit, especially if one of you isn’t currently working and won’t be making NICs from your income.
By making a claim, you can ensure that you don’t have gaps in your NI record and receive the full State Pension.
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Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.