NIC Implications and the High Income Benefit Charge

Paper family in hands on wooden coloured background welfare concept

The high income benefit charge was introduced on 7 January 2013 to restrict the availability of child benefit to high earners and their partners.

Essentially, where one partner earns more than £50,000, HMRC will claw back the child benefit paid. The amount clawed back will be 1% of the benefit paid for every £100 of adjusted income in excess of £50,000. If the adjusted net income exceeds £60,000 no child benefit is due.

Couples who were affected were invited not to claim the child benefit in the first place in order to avoid the later claw back. However, in some cases this decision may not have been the correct one and could prove costly in the long term.

If the one partner is not employed, consideration should be given with regard to claiming the benefit. Individuals who make a claim for child benefit for children under the age of 12 are entitled to receive Class 3 NIC credits, which in turn preserves their NIC record and hence the level of state pension they will receive in the future.

To ensure that the NIC credit is obtained, the non-earning partner should make the claim for child benefit but elect not to receive the payments. This will ensure that the state pension benefit is preserved whilst the children are below 12 but avoid the necessity for the benefit claw back from the high earning partner.

At Green & Co, we have a dedicated tax team who deal with scenarios like this all the time. For more information, or to speak to one of our experts, please contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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