Some 200,000 parents a year are applying for child benefit in the wrong parent’s name. This simple error could cost them their full state pension when they retire.
Nearly a quarter of a million (200,000) parents a year are risking their pension fund by making a simple mistake when it comes to claiming child benefit.
Thousands of families are putting child benefit in the working parent’s name when the other parent temporarily gives up work.
It means that parents who stay home to look after children are missing out on national insurance credits, which means they may not qualify for their full state pension when they retire.
It’s a costly mistake which could mean parents miss out on thousands of pounds, because Britons need 35 years of NI credits to claim a full pension according to HM Revenue and Customs (HMRC).
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Sarah Coles, senior personal finance analyst at Hargreaves Lansdown said the system is “horribly confusing”.
“The High Income Child Benefit Tax Charge is pointlessly complicated and widely misunderstood, so it’s no wonder that tens of thousands of people get things wrong, and risk shock tax bills.
“Even the mountains of paperwork involved are horribly confusing.
“It means vast swathes of people could face massive tax bills out of the blue.”
She continued: “This isn’t their fault.
“More to the point, even if they understand it at the outset, by the time they’ve waded through confusing forms, there’s a reasonable chance they’re thrown off track.”
Ms Coles wants HMRC to come up with a better solution so that parents aren’t penalised.
She added: “Surely there’s a better way of doing this, without an enormous amount of wasted time and effort from both parents and the taxman.”
What is the High Income Child Benefit Charge?
Since 2013, if one of the parents earns over £50,000, they will pay the charge, which means paying back a chunk of their child benefit.
The amount someone repays rises with their earnings, until someone earning £60,000 repays it all.
Someone who repays it all can opt out instead.
To repay it, people need to complete a self-assessment form every year.
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