Critical tick-box thousands of families miss every year – and it could cost you £30,000

THOUSANDS of parents could lose out on as much as £30,000 by failing to tick a critical box on a form for child benefit.

Parents who earn enough to trigger the high income child benefit charge risk missing out on state pension because they are failing to keep claiming National Insurance (NI) credits.

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In January 2013, the government introduced the high income benefit charge.

Under this system, any parents where either they or their partner earn over £50,000 and claim child benefit are charged by HM Revenue & Customs (HMRC).

The amount they are charged is on a sliding scale up to earnings of £60,000, at which point they would end up with a bill exactly matching the amount of child benefit they receive.

These thresholds have not changed since the system was introduced, meaning more and more parents have been dragged into paying the charge over the last decade as wages have increased.

Many parents who are hit by the charge now may not think of themselves as “high income”, according to former pensions minister Sir Steve Webb.

Not surprisingly, thousands of families have stopped bothering to claim child benefit since they would just receive a tax bill for the same amount.

As a result, the number of people claiming child benefit has fallen every year since the charge was introduced.

However, parents who are not working and claim child benefit can also tick a box to claim NI credits for looking after any children under 12.

If you give up paid work to look after a young child, you may end up with a gap in your NI record, which affects how much state pension you can claim.

NI credits fill in any gaps, protecting the amount of state pension you receive when you retire.

You need 30 qualifying years of NI to get the full basic state pension – currently £203.85 a week – either through contributions made by working or credits.

By not claiming child benefit, thousands of parents are forgoing these NI credits and damaging their state pension entitlement in retirement.

If you don’t have enough qualifying years for a full state pension, adding one extra year to your NI record could boost your retirement by £300 a year.

Someone who doesn’t work until their child is primary school age – missing four years of NI contributions – could therefore lose £1,200 a year from their state pension by not claiming the credits.

If you were to claim state pension until you were 90, they could potentially miss out on £30,000 in state pension payments.

Mr Webb, now partner at consultancy LCP, explained that you need to fill in a specific tick box on the child benefit form to claim NI credits, even if you don’t want to claim child benefit.

“Many thousands of higher income couples who have started a family have decided that claiming child benefit is a waste of time,” he said.

“This is because it looks as though one partner would get child benefit and the other partner would get a tax bill for the same amount, and this seems pointless.

“But child benefit is a passport to valuable NI credits which help you to build up a state pension at no cost to yourself.

“The best approach is to fill in the claim form and tick the box to get the NI credits but not the cash benefit.

“That way, you protect your state pension but don’t have the hassle of the high income child benefit charge to deal with.”

How do I claim NI credits?

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You can claim NI credits without also claiming child benefit.

Even if you don’t want to claim child benefit, you need to fill out the form to let HMRC know you want to get the credits instead.

Visit the government website to start making a child benefit claim or you can download the paper form here.

The relevant question is number 62 on the paper form, shown below.

Writing in a column in The Telegraph, Mr Webb explained that there is a box which says: “I do not want to be paid Child Benefit, but I do want to protect my State Pension”.

Simply tick this box to let HMRC know you would like to receive NI credits but don’t want the cash benefit now.

If you fill out the paper form, you need to sign and date the form and post it back with the documents requested to: Child Benefit Office (GB), Washington, NEWCASTLE UPON TYNE, NE88 1ZD.

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This post first appeared on thesun.co.uk