Child Benefit Scheme – An Insight

Child Benefit Scheme

The Child Benefit Scheme is an excellent plan proposed by the UK Government, which provides an outstanding guarantee for your children to pave their way in the future. As a parent, you are supposed to be responsible for your child, but it may get very cumbersome at times. With child benefits, the government covers the cost of your children, which is generally paid to you once in 4 weeks.

While eligibility for this scheme varies depending on a number of criteria, as for the 2021-22 tax year, it usually pays £21.15 per week for your first child, and thereon, you will be able to receive £14.00 per week for every child after your first child. The first step into gathering more knowledge about this scheme is to understand what makes you eligible for the child benefit scheme. 

What makes you eligible?

The child benefit scheme is applicable for those individuals who take full responsibility for a child who is under 16 years of age or between 16 to 20 years but is still continuing education or some sort of academic training. Whether you have savings or ample investments to fall back on, this scheme is eligible for all working and non-working individuals as long as they are responsible for a child within the stipulated age range.

High Income Child Benefit Charge

Irrespective of whether the child living with you is your own child or not, a tax charge is applicable, in case the individual income per year (your or your partner’s) exceeds £50,000. This tax charge is called the high-Income Child Benefit Charge. The highest income-generating person in the household has to pay the tax. You can pay the tax through the yearly Self-Assessment tax return. The other option is to register within 5th October for self-assessment after the end of the tax year, for which the tax is applicable.

The High Income Child Benefit Charge is calculated to be 1% of the benefit you are entitled to foreach £100 of your personal income more than £50,000 but less than or equal to £60,000.

What does this indicate? If you or your partner’s annual income is more than or equal to £60,000, the child benefit payments become nil, due to the additional tax you are paying. As of the 3rd March 2021 Budget, no increase in this £50,000 limit has been announced, which may mean more tax for Basic Rate taxpayers, along with the Higher Rate tax-payers (who already has to pay more taxes).

Points to note:

  • Declared benefits in kind (company benefits apart from wages or salary) might push your income over the threshold value of £50,000.
  • If your spouse has no income or earns less than you, it would be wise to claim Child Benefit in his/her name. This is because making a Child Benefit Claim makes it easier to receive National Insurance credits, which accrue towards State Pension entitlement. However, if your income is higher, you may still transfer the credit to your lesser earning or zero earning spouse’s name.

What does not make you eligible for Child Benefit Scheme?

  • If you are responsible for the child, but he or she lives in a residential care home or a hospital, you will lose your eligibility for this claimunless you are still providing money for the child’s needs.
  • Also, child benefit cannot be applied for if your offspring is over 16 years older and is no longer associated with approved training or any kind of full-term education. In such cases, the additional parameter for losing eligibility is that the child should do paid work for a minimum of 24 hours per week.
  • You will also lose your eligibility if your child remains in custody or prison for the past 8 weeks or has been taken care of by any local authority during the time frame.
  • This scheme is also not valid if your child is eligible for other income-based allowances.
  • Again, if your child is married or living with a working partner, it also leads to losing your eligibility for the scheme. 

What makes you responsible for a child?

It is considered that you are responsible for the life of a child depending on two criteria: if you pay for their regular cost for well-being and sustenance and if you live with them continuously. You can apply for child benefit if you make a monetary expenditure to support the child and will be required to spend the money through the benefit on your child’s needs. It is also possible for parents or those looking after other children to claim their benefit if the local council does not take responsibility for the child. 

Go through the conditions to check whether you are eligible for this claim. If you find yourself eligible, apply as soon as possible for enjoying the benefits.