What is Tax-Free Childcare?

Tax-Free Childcare is a government scheme to support working parents with childcare costs.

 

If eligible, you set up an online childcare account which you can use to pay your childcare provider directly. For every £8 you pay in, the government will pay in an extra £2.

 

You can get up to £2,000 per child per year, or £4,000 for disabled children. You can use Tax-Free Childcare to pay for:

  • Registered childminders, nurseries and nannies

  • Registered after-school clubs and play schemes

  • Registered schools

  • Home care workers working for a registered home care agency.

 

How the Tax-Free Childcare scheme works

For every £8 you pay into your account, the Government will pay in £2, up to a maximum of £2,000 per year per child (£4,000 if the child has a disability). The amount you save with Tax-Free Childcare will depend on your childcare costs. To receive the full £2,000 benefit from Tax-Free Childcare you must have childcare costs of £10,000 per child per year. If your childcare costs are lower than this, your saving will be less than £2,000.

Parents get paid

Parents add 80% to total childcare bill to online account

Government adds 20%

Payment via Bacs to childcare provider

Who can join the Tax-Free Childcare scheme?

The scheme is available to parents of children under the age of 12 - children stop being eligible on 1 September after their 11th birthday (under age 17 for children with disabilities). Adopted children are eligible, but foster children are not. Both parents must be in employment, or one parent in a single-parent household, earning between £131.36 per week (£123.20 per week if the parent is under 25) and £100,000 per year1.

 

If you are self-employed you are eligible to join provided you have registered your business with HM Revenue and Customs (HMRC). You can use income from both employment and self- employment to meet the minimum income requirement. Your first 12 months of self-employment is your start-up period. During this time, you don’t have to earn the minimum £131.36 a week to be eligible for Tax-Free Childcare. You can average your self-employment income across the year to meet the minimum income criteria (however you will need to meet the minimum income using just your self-employment income if you take this approach).

 

Parents must usually live and work in the UK unless you are a Crown servant or member of the Army and posted overseas. The scheme also extends to those living in any EEA country and working in the UK. You may be able to use Tax-Free Childcare to pay a provider based in a European Economic Area (EEA) country (this change was introduced on 21 March 2019).

 

Parents can still apply for Tax-Free Childcare if they are on paid:

  • sick leave

  • ordinary or additional maternity, paternity or adoption leave or getting maternity allowance

  • shared parental leave, or

  • annual leave.

If you are not currently working, you must wait until 31 days before you start or re-start work to apply for Tax-Free Childcare. This includes parents who are on maternity leave.

Where one parent does not work, it may still be possible to get Tax-Free Childcare if the parent who is not in work is receiving certain benefits, for example, Employment and Support Allowance or Carer’s Allowance.

 

How does Tax-Free Childcare work in practice?

The amount you save with Tax-Free Childcare will depend on your childcare costs. For every £8 you pay into your account, the Government will give you £2, up to a maximum of £2,000 per year per child (i.e. you would need to put in £8,000 for the Government to top up your account with £2,000).

 

You can pay into your account at any time and receive the top up, up to a maximum of £500 top up per quarter (£2,000 top up per annum). These figures increase to £1,000 per quarter (£4,000 per annum) if your child has a disability. Other people, such as family, friends and employers, can also pay into the account. Payments can be made directly to the childcare provider through the online account.

 

If you have more than one child in childcare you will need to open an account for each child, however you can do this as part of a single application.

 

The Application Process

If you are a working parent you will need to open a Government Gateway account through the childcare service. You can access this via website www.ChildcareChoices.gov.uk  You will need to have the following information to hand:

  • Your National Insurance Number and date of birth

  • Your partner’s National Insurance Number and date of birth (if applicable)

  • A payslip, P60 form or your passport

  • Each child’s date of birth

  • The date you and your partner (if applicable) started your most recent employment (this can be an approximate date provided the employment has been for more than three months).

 

Your application will be assessed by HMRC who will let you know if you are eligible for Tax-Free Childcare.

You will need to reconfirm that you are still eligible for Tax-Free Childcare every 3 months using your childcare service account. You can do this by ticking a box to confirm that your details have not changed. You will be reminded to do this 4 weeks before the reconfirmation deadline.

 

If you have any queries regarding the process, you can contact the Childcare Service Helpline on 0300 123 4097.

 

Using the Online Childcare Service Account

Once you have successfully applied for your online account, you will be able to:

  • view all of your children’s Tax-Free Childcare accounts in one place

  • confirm every 3 months that you are still eligible for Tax-Free Childcare

  • make payments into each child’s Tax-Free Childcare account, and

  • use each account to pay for your childcare costs.

 

The Government has said that it will apply the top up automatically, and it should be received instantly.

 

You can add your childcare provider to your childcare account by clicking on the ‘Your Tax-Free Childcare account’ link on your account homepage. You can pay them directly through your childcare account and can also set up a regular payment on a chosen day each month.

 

When you pay money in, it will take 24 hours to clear before you can pay your childcare provider. Payments to childcare providers will take three days to arrive in their account. When you apply for Tax-Free Childcare, you’ll be given a unique reference number for your child.

 

You need to give this number to your childcare provider so that they can match your payments to your child. You can find this in your welcome pack by clicking the ‘Secure messages’ link on your account homepage.

Frequently Asked Questions

Can cross-border workers join the Tax-Free Childcare scheme?

While eligibility criteria states that only parents who live and work in the UK will be eligible, this extends to those living in Ireland (or a resident of another EEA state) who are working in the UK. You may be able to use Tax-Free Childcare to pay a provider based in a European Economic Area (EEA) country. This is a complex area for families, and if you think it might be relevant to you, we advise you to call our Family Benefits Advice Service on 0800 028 3008.

Are there any circumstances where a family will be eligible for Tax-Free Childcare if one parent is working and the other is not working?

Both parents must usually be working. However, if one parent meets the work requirements and the other is unable to work, for example, due to a disability or caring responsibilities, then they may still be able to claim Tax-Free Childcare. For example, parents claiming Carer’s Allowance or Contributory Employment and Support Allowance (ESA) will be eligible for the scheme, provided the other parent is also eligible.

Can I apply for Tax-Free Childcare if I am a single parent?

Yes, if you are a single parent you can apply for Tax-Free Childcare provided you meet the eligibility requirements (see page 3). Only one account can be set up per child so if parents are separated, and both want to contribute to childcare costs, this can be done through one account managed by the main carer.

The Government’s website for Tax-Free Childcare also says that parents can get 30 hours free childcare, can I apply for that?

The Government’s website contains information on a range of schemes to assist parents with their childcare costs.

The 30 hours free childcare offer is not available in Northern Ireland and will only apply to families living in England, who are allowed to use this alongside Tax-Free Childcare or Childcare Vouchers. Similar schemes are being piloted in Scotland and Wales.

If you are a parent in England, it is important to note that it is not necessary to join Tax-Free Childcare in order to receive the free hours of childcare. If you are currently eligible for Childcare Vouchers, these can continue to be used to pay for any registered childcare over and above the 30 hours free childcare offer

If I am on maternity leave with a new baby, can I still pay into a Tax-Free Childcare account for my older children?

You can have Tax-Free Childcare accounts for your older children while on maternity leave for the newborn. You will be able to retain and pay into those accounts, even if you do not use childcare for the older children during your maternity leave period. However, if you are on maternity leave you will not be able to open a Tax-Free Childcare account for your newborn child until 31 days before you return to work.

 

You can only use Tax-Free Childcare to pay for childcare where one of the main reasons for using the childcare is to enable you to work. Typically you cannot use Tax-Free Childcare to pay for childcare on days that you are not working. You can, however, use Tax-Free Childcare for non- working days if your provider requires you to block book (for example, by week) or pay in order to retain a space, or you need access to childcare to facilitate your work.

Can cross-border workers join the Tax-Free Childcare scheme?

While eligibility criteria states that only parents who live and work in the UK will be eligible, this extends to those living in Ireland (or a resident of another EEA state) who are working in the UK. You may be able to use Tax-Free Childcare to pay a provider based in a European Economic Area (EEA) country. This is a complex area for families, and if you think it might be relevant to you, we advise you to call our Family Benefits Advice Service on 0800 028 3008.

Tel: 0208 330 9331

2 Grafton Rd

Worcester Park

KT4 7QP, UK

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