Record number of families opt-out of claiming child benefit, but the decision could have serious repercussions for your future
Stark warning for families as number of parents who opt-out of receiving child benefit reaches 10-year high
The number of families opting out of receiving child benefit has hit an all-time high, according to new government data. But opting out of child benefit could have serious consequences when it comes to your pension.
The latest government statistics, based on those claiming child benefit as of August 2023, show that fewer families were claiming and receiving the benefit compared to the previous year. In August 2023, 7.65 million families were claiming child benefit, 47,000 fewer than in August 2022. Similarly, 6.91 million families actually received the benefit, 106,000 fewer than in the previous year.
The decline in families receiving the benefit is down to the controversial High Income Child Benefit Charge that was introduced in 2013, by then Chancellor of the Exchequer, George Osbourne. Aspects of child benefit, including the High Income Child Benefit Charge, have long been thought to be unfair. This tax charge means that once you start earning over a certain amount (in the last tax year, this was £50,000, but is now £60,000), you effectively have to start repaying some of the child benefit you receive in the form of the High Income Child Benefit Tax. In the current tax year, by the time you earn £80,000, you are effectively repaying all of the child benefit you receive.
Parents can choose to claim child benefit, receive the payments and pay the charge, or they can opt out of child benefit altogether. The number of families opting out of child benefit payments, hit 741,000 in August 2023, almost double those who opted out in 2013.
Child benefit in a nutshell
Introduced in 1977, child benefit is a payment from the government to help families with the costs of raising a child. If you are responsible for raising a child, you are eligible to claim. As of 6 April 2024, it is paid at a rate of £25.60 per week, which works out as £1,331.20 per year, for your first child. For any subsequent children, you will receive £16.97 per week, which equates to £882.44 per year.
While some benefits are subject to the two-child benefit cap, child benefit isn't - there is no limit on how many children you can claim for.
What happens if you opt out of child benefit payments?
Parents can choose to opt out of receiving child benefit payments, especially if they have to pay some or all of it back, but this can have serious repercussions. This is because claiming child benefit will earn you national insurance credits that work to build your entitlement to the state pension (and you need 35 years of national insurance contributions to get the full state pension).
GoodtoKnow Newsletter
Parenting advice, hot topics, best buys and family finance tips delivered straight to your inbox.
According to analysis from our sister brand MoneyWeek, 'Just one year of missed credits could lead to a reduction of £329 a year in state pension, or around £6,500 over a typical 20-year retirement.
'Someone who doesn’t go back to work until their child is of primary school age, and therefore misses out on four years of National Insurance, could end up £1,316 per year short on their state pension if they don’t claim their credits. Over 20 years, this would be worth £26,320.'
But it is possible to claim the NI credits without getting the money - there's a box you can tick on the child benefit form to that affect.
If you have previously opted out of receiving child benefit, you may also find that due to threshold changes that came into effect in April 2024, you might now be eligible to receive the full amount without repaying any of it, or now be entitled to tapered payments where previously you had to repay it all. The threshold at which you have to start repaying any of the child benefit has been raised from £50,000 to £60,000, and the upper limit at which you repay the whole amount raised from £60,000 to £80,000. You can find out about how to restart your child benefit payments here.
If you have missed out on NI credits by not claiming child benefit, all is not lost. From April 2024, parents will initially be able to claim credits dating back to 2013 - after that they will only be able to backdate claims by six years.
To better manage your family budget, make sure you factor in average childcare costs. You might also be interested in whether it's financially worth returning to work after having a baby, and how you might be impacted by the motherhood penalty.
Sarah is GoodtoKnow’s Consumer Writer & Money Editor and is passionate about helping mums save money wherever they can - whether that's spending wisely on toys and kidswear or keeping on top of the latest news around childcare costs, child benefit, the motherhood penalty. A writer, journalist and editor with more than 15 years' experience, Sarah is all about the latest toy trends and is always on the look out for toys for her nephew or Goddaughters so that she remains one of their favourite grown ups. When not writing about money or best buys, Sarah can be found hanging out with her rockstar dog Pepsi, getting opinionated about a movie or learning British Sign Language.
-
Psychologist Dr Becky reveals top screen time rules she uses for her own kids and admits getting the balance right is a 'struggle' - and we totally relate to #3
Psychologist Dr Becky chats top screen time rules for her own children, and how even she struggles to get the right balance. Her third rule is relatable to parents everywhere.
By Lucy Wigley Published
-
9 slime toys kids will love (even if their parents don't), including a no-residue option for mess-free play
Slime toys are a great form of sensory play - we've picked nine top-rated options to keep them entertained and the mess to a minimum
By Sarah Handley Published
-
3 ways you can save money on Alton Towers tickets (and the fine print you need to know to bag the best bargain)
Did you know you can go to Alton Towers from as little as £11? But it might leave older children a little miffed - here's why
By Sarah Handley Published
-
New data highlights the main disparities when it comes to parents requesting flexible working, and sadly we're not surprised by the findings
We'll give you three guesses as to which parent is more likely to ask for flexible working arrangements from their employer...
By Sarah Handley Published
-
'It isn’t a holiday – it is crucial bonding time' - 70% of dads can't afford to take two weeks paternity leave, according to new research
The research also found that only 14 per cent of fathers were ready to return to work mentally after taking their paternity leave
By Sarah Handley Published
-
Two-child benefit cap 'pushes children into poverty' - campaigners urge government to scrap 'cruel policy' that impacts 1 in every 10 children
The controversial two-child benefit cap has met with strong opposition since its introduction in 2017
By Sarah Handley Published
-
Gen-Z could be costing their parents £1,300 a year, by refusing to do this one thing (but it's not always their choice)
It's not just parents who are facing the additional costs, the costs for Gen Z could be even higher
By Sarah Handley Published
-
More than half of parents want to do this important thing for their kid's education but can’t afford to, according to new research
Pressures on the family budget are preventing parents from paying for educational support outside of school
By Sarah Handley Published
-
75% of mums feel guilty buying things if they earn less than their partners, according to social media poll, and the comments section was part heartbreaking, part inspiring
Some mothers felt guilty for spending their partners money, while others saw it as household money instead
By Sarah Handley Published
-
10 best zoos in the UK based on ticket prices, reviews and value for money
The best zoos in the UK have been determined based on a number of key factors, include prices, popularity, Trip Advisor ratings and how many animals they have
By Sarah Handley Published