Child benefit: What is it worth and who can claim it?

Child Benefit: Understanding Your Entitlement and the Earning Threshold

For many families across the UK, Child Benefit is a vital financial lifeline, helping to ease the burden of raising children. But what exactly is it worth, who is eligible to claim it, and crucially, what happens if your income creeps up? The rules surrounding Child Benefit can be complex, and understanding them is key to ensuring you're receiving the support you're entitled to.

At its core, Child Benefit is a government payment designed to help with the costs of bringing up children. It's typically paid to the primary carer, usually the mother, and continues until the child turns 16, or 19 if they remain in full-time education or training. This seemingly straightforward benefit, however, comes with a significant caveat: an income-related threshold that can see payments reduced or even eliminated entirely.

How Much is Child Benefit Worth?

The current rates for Child Benefit, as of April 2023, are as follows:

£24.00 per week for your eldest or only eligible child.
£15.90 per week for each additional eligible child.

These figures might not sound enormous on their own, but when multiplied over a year, they represent a substantial contribution for many households. For a family with one child, this equates to over £1,248 annually. For a family with two children, the total can reach nearly £2,000 per year. This money can make a real difference, whether it's covering school uniform costs, extracurricular activities, or simply contributing to the weekly grocery shop.

It's also worth noting that claiming Child Benefit can have other important implications beyond the direct payment. Crucially, it can help you qualify for National Insurance credits, which are essential for building up your State Pension. If you're not working or earning enough to pay National Insurance contributions yourself, claiming Child Benefit for a child under 12 will automatically give you these credits. This is a significant, often overlooked, benefit that can have long-term financial consequences.

Who Can Claim Child Benefit?

Generally, you can claim Child Benefit if:

You are responsible for a child under 16 (or under 19 if they are in full-time approved education or training).
You are living in the UK.
The child you are claiming for is:
- Under 16 and living with you.
- Under 20 and in approved full-time education or training (not higher education like university).
- Under 18 and an apprentice or in training for a trade.
- Under 16 and living away from home, but you are still responsible for them and making at least the same level of financial contribution towards their upkeep.
- Under 20, living with someone else, and that person is getting Child Benefit for them.

You can claim Child Benefit even if you have savings or if the child you are claiming for has their own earnings. However, the income of the highest earner in the household is what determines whether the benefit is reduced.

The High Income Child Benefit Charge: When Does it Kick In?

This is where things get a bit trickier. The government introduced the High Income Child Benefit Charge (HICBC) to ensure that those on higher incomes contribute more to the cost of public services. Essentially, if you or your partner (including a spouse or civil partner you live with) earn over a certain amount, you may have to pay a tax charge to claw back the Child Benefit you receive.

The threshold for this charge is currently set at £50,000 per year for the highest earner. If the highest earner's income is between £50,000 and £60,000, the benefit is reduced gradually. For every £100 earned over £50,000, 1% of the full Child Benefit award is charged. This means that if the highest earner's income is between £50,000 and £59,999, they will receive a partial charge.

The situation becomes more definitive at the £60,000 mark. If either you or your partner earns £60,000 or more, the Child Benefit you receive is effectively cancelled out by the tax charge. In such cases, you might consider opting out of receiving the actual payments to avoid the administrative hassle of paying the charge through self-assessment. However, it's crucial to remember that even if you opt out of receiving the payments, you will still lose the associated National Insurance credits, which, as mentioned, can impact your State Pension entitlement.

So, what's the best course of action if you're nearing or exceeding these thresholds? Sarah, a mother of two from Manchester, shared her dilemma: "We're both working, and my husband's salary just nudged over the £50,000 mark last year. It's frustrating because we're still paying for childcare and all the usual costs, but suddenly we're losing some of the Child Benefit. We've had to look at our finances very carefully."

This sentiment is echoed by many. The £50,000 threshold, while seemingly a clear line, can feel arbitrary to families who still experience significant financial pressures. Many argue that the threshold hasn't kept pace with inflation or the rising cost of living, leaving more families in a position where they are penalised.

Navigating the System: What Are Your Options?

If your income is approaching or exceeding the threshold, you have a few choices:

Continue receiving Child Benefit and pay the tax charge: This is the simplest option if the tax charge is less than the Child Benefit you receive. You'll need to register for Self Assessment and pay the charge annually.
Opt out of receiving Child Benefit payments: If the highest earner's income is £60,000 or more, you can ask HM Revenue and Customs (HMRC) to stop your Child Benefit payments. This avoids the tax charge. However, as highlighted, it means you lose the National Insurance credits. You can usually restart payments later if your income drops, but you won't get backdated credits.
Adjust your finances: Some families choose to reduce their taxable income to stay below the threshold. This could involve increasing pension contributions, as these are usually tax-efficient and can reduce your adjusted net income.

The decision of whether to claim Child Benefit, opt out, or pay the charge is a personal one, heavily dependent on individual circumstances. It's always advisable to use HMRC's online calculator or seek professional financial advice to understand the precise impact on your situation. For many, Child Benefit remains a crucial support, but understanding the earning limits is paramount to navigating this important aspect of family finances.

The conversation around Child Benefit and the High Income Child Benefit Charge is ongoing, with many calling for a review of the current thresholds. As the cost of living continues to rise, ensuring that financial support systems are accessible and fair to a broad range of families remains a key challenge for policymakers.