Simple error sees 200,000 people miss out on boost to state pension

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    To qualify for a full state pension, Britons need to have 35 qualifying years which requires them to have paid at least 10 years in National Insurance. That’s not a problem for lots of people, but those that have taken time out from full-time employment to look after children, might not realise until it’s too late. However there is a simple way around it.

    Claiming Child Benefit solves this problem for many people as the benefit automatically provides National Insurance credits towards the State Pension.

    However, even if a person would lose some or all of the payment through tax, it is considered to be important to at least register for it and opt out of receiving any money – that way National Insurance credits are given so that this doesn’t affect the state pension.

    It’s thought up to 200,000 British people are missing out on £179.60 a week when they come to retire because of this simple mistake.

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    Child Benefit pays £21.15 per week for the eldest or only child and £14 for all additional children and, although it used to be available to all families no matter what their income, it’s now taxed if someone earns more than £50,000 a year.

    Since 2013, if someone’s income is above £50,000, they get taxed one percent on every £100 above the threshold.

    Once a parent earns £60,000 they lose all of the benefit through tax – so it’s understandable why higher income earners would choose not to receive it.

    However, even if you would lose some or all of the payment through tax, it’s important to at least register for it and opt out of receiving any money – that way National Insurance credits are given so that this doesn’t affect the state pension.

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    Anyone who receives Child Benefit who earns more than £50,000 a year can fill out a form registering for Child Benefit but opt out of receiving payments if they prefer.

    If they don’t opt out or submit a separate self assessment form to HM Revenues and Custom (HMRC) by October 5, they could face a fine.

    The £50,000 threshold hasn’t changed since 2013 which has concerned some experts as they fear it will mean more basic rate taxpayers will be hit by the High Income Child Benefit Tax Charges (HICBC) over the coming years because salaries have increased.

    Parents should also be aware that they could bring themselves under the £50,000 threshold by taking advantage of allowances.

    Chartered Financial Planner Kay Ingram explained: “Parents receiving Child Benefit, where a member of the household has income over £50,099 in the 2020/21 tax year, must pay High Income Child Benefit Charge ( HICBC).

    They should notify HMRC by registering for self assessment by October 5.”

    However, she added that some things can be deducted from income bringing people below the threshold again.

    Ms Ingram said: “Certain deductions can be made from the income counted, so that the tax charge is reduced or even eliminated.

    She continued: “Some parents who have waived their right to Child Benefit, to avoid the tax charge, may be able claim once more if their income has fallen, or they can make these deductions from income.

    “But deductions from the income counted can be made for UK private pension savings and charitable donations made under the gift aid scheme, restoring some or all of the tax free Child Benefit.

    “Pension savings can be offset against income in the same year they are made.

    “Gift aid donations can be deducted in the year made or carried back to the previous tax year.”



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