Long-term effects of child benefit
When your child is born, you or your partner may claim child benefit, or perhaps you won’t bother. If either of you has annual income of £60,000 or more, all of the child benefit your family receives will be clawed back as a High Income Child Benefit Charge (HICBC). But not claiming child benefit can disadvantage both the parent and the child.
Where a non-working parent (usually the mother) doesn’t claim child benefit, she won’t receive National Insurance (NI) credits while the child is aged under 12 years. This will leave a gap in her NI record, and on reaching state retirement age she may receive a smaller state pension.
The new flat rate state pension, paid to people who retire on or after 6 April 2016, doesn’t allow an individual to receive a pension based on their spouse’s NI contributions.
If child benefit is never claimed in respect of the child, on reaching 15 years and 9 months, the young person won’t be issued with a UK NI number. The individual will have to apply for an NI number in order to work, open an ISA account, or receive a student loan.
To avoid these difficulties, you should apply for child benefit on the birth of your child. You can opt out of receiving payment of the benefit by ticking a box on the application form, but this won’t affect your NI credits. If your income falls below £60,000 so the HICBC doesn’t claw back all of the benefit, you can reverse the opt-out and start to receive payments.