Last month we looked at tax planning to minimise or eliminate the high income child benefit to keep both husband and wife (or civil partners) looking after a child below the £50,000 threshold.
Where the income of one of the individuals exceeds £60,000 such that the whole of the child benefit is taxed they may be tempted not to claim child benefit at all. This may however limit the amount of State pension and other benefits at a later date. Under current rules Individuals must make National Insurance contributions for 35 years to receive a full State Pension. Individuals may claim Child Benefit and choose not to receive the payments, which means they do not have to pay the charge but still receive the associated National Insurance Credits for that year and protect their State Pension entitlement.
Note that grandparents who have ceased working and are looking after their grandchildren may also claim NIC credits for that year which would count towards their 35 year contribution history. Remember that you can check your National Insurance record online on the DWP website to see:
• what you’ve paid, up to the start of the current tax year (6 April 2019)
• any National Insurance credits you’ve received
• if gaps in contributions or credits mean some years do not count towards your State Pension (they are not ‘qualifying years’)
• if you can pay voluntary contributions to fill any gaps and how much this will cost
You can check your State Pension online at any time for a forecast of how much you could get. The service will also confirm when you will reach State Pension age, under the law as it stands. Note that Government proposes to increase the State Pension age to 68 from 2037.
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