Millions of families across the United Kingdom are set to receive a welcome financial boost next spring, as HM Revenue & Customs (HMRC) has confirmed an increase to Child Benefit payments. The uplift, scheduled to take effect from April 2025, is pending formal Parliamentary approval following the Labour Party's Autumn Budget.
What are the new Child Benefit rates?
The current weekly payment of £26.05 for the first child is set to rise to £27.00. For every subsequent child, the rate will increase from the current £17.25 per week to £17.90. This provides a tangible increase for households managing the costs of raising children.
Eligibility for the benefit extends to anyone responsible for a child under the age of 16. It also covers young people under the age of 20 if they are in approved full-time education or unpaid training. Applications can be made as soon as a birth is registered or a child comes to live with you, and claims can be backdated for up to three months.
More than just cash: Protecting your State Pension
Claiming Child Benefit serves a crucial function beyond the immediate financial support. It can directly impact your future State Pension entitlement. If you or your partner are not working, or are earning less than £125 per week, claiming Child Benefit ensures you receive National Insurance (NI) credits.
These credits are essential for qualifying for the full State Pension upon retirement. It is important to note that only one parent can receive the Child Benefit payment for a child. Therefore, couples should consider which parent would most benefit from accruing the NI credits.
Navigating the High Income Child Benefit Charge
For higher earners, the High Income Child Benefit Charge comes into effect. If the highest earner in your household has an individual income exceeding £60,200 per year, you will be required to repay a portion of the benefit through the self-assessment tax system.
The charge is calculated at a rate of 1% for every £200 of income over the £60,000 threshold. If either parent's income reaches £80,000 or more, the entire Child Benefit amount must be repaid. HMRC bases this on your 'adjusted net income', which is your taxable pay after accounting for schemes like salary sacrifice.
However, there is a key strategy for those affected. You can choose to opt out of receiving the actual payments while still formally claiming the benefit. This allows you to protect your valuable National Insurance credits without incurring a tax charge. Furthermore, increasing contributions to a workplace or personal pension can reduce your adjusted net income, potentially lowering your liability under the charge.
