Following the communications between the Treasury Committee and HMRC regarding an update on plans to prevent parents who didn’t claim Child Benefit from missing out on their State Pension entitlement, Jon Greer, head of retirement policy at Quilter, has shared his reaction with us as to what this might mean commenting:
The UK’s Treasury Committee has this week scrutinised HMRC for its handling of National Insurance (NI) credit claims for parents who didn’t claim Child Benefit chastising them for the length of time it is taking to implement the new rules and whether the new rules do actually simplify the system or in fact make it more complex.
At present, parents who have not claimed Child Benefit and missed out on NI credits can fill out the CF411A form either online or via post which offers a mechanism for HMRC to review whether you can retrospectively get NI credits further back than just three months. However, HMRC say they only may still award credits under certain conditions, such as reaching State Pension age after the period in question or sharing child care with a registered Child Benefit recipient.
This issue is becoming more and more relevant given frozen thresholds for both income tax and the High Income Child Benefit Charge (HICBC) and high wage growth due to inflation. The HICBC should be levied at around £65,000 now if it had gone up with inflation and according to the Office for Budget Responsibility there will be 2.1 million more higher rate taxpayers and 350,000 additional-rate taxpayers in five years’ time. Many of these taxpayers who are also parents, might not have claimed Child Benefit, mistakenly believing it would not benefit them or they’d need to go through the much maligned process of filing out a self-assessment form. This misunderstanding could lead to significant gaps in their NI record, affecting their State Pension and at present while there seems to be routes to getting retrospective credits in place there is still no formalised process in place.
The Treasury Committee has raised concerns over HMRC’s approach to rectifying this issue. Despite HMRC’s plans to introduce a route for claiming NI credits for unclaimed Child Benefit years, questions linger about the initiative’s effectiveness and reach. The committee is particularly concerned about the three-year delay in implementing the system and whether HMRC will proactively identify and encourage eligible individuals to claim their credits.
Harriett Baldwin, the Chair of the Treasury Committee, emphasised the need for HMRC to undertake a more concerted effort to inform and assist those at risk of missing out. The reliance on basic communication channels, such as parenting groups, may not suffice. This is especially true for parents whose children are older than 16 and are no longer engaged with these groups. The committee also questioned the initiative’s labelling as a ‘simplification,’ arguing that it adds complexity to an already convoluted tax system, potentially burdening individuals and HMRC alike.
