Are you a working parent? Do you know about the Tax-Free Childcare scheme?

The Government Tax-Free Childcare scheme has been in operation since 2017. It replaced the Employer-Supported Childcare scheme, which as the name suggests, was offered to parents by their employers. The new scheme is open to everyone (subject to eligibility) and benefits more families than the previous one did.

What is Tax-Free Childcare?

As detailed on the GOV.UK website, you can get up to £500 every 3 months (up to £2,000 a year) for each of your children to help with the costs of childcare. This goes up to £1,000 every 3 months if a child is disabled (up to £4,000 a year).

If you are eligible for Tax-Free Childcare, you’ll set up an online childcare account for your child. For every £8 you pay into this account, the government will pay in £2 to use to pay your provider.

You can get Tax-Free Childcare at the same time as 30 hours free childcare if you’re eligible for both.

You can use Tax-Free Childcare to pay for approved childcare, such as:

  • childminders, nurseries and nannies
  • after school clubs and play schemes

Your childcare provider must be signed up to the scheme before you can pay them and benefit from Tax-Free Childcare. Check with your provider to see if they’re signed up.

Read our full Tax-Free Childcare explainer to see how the scheme work and how you can benefit:

Tax-Free Childcare is available to around 2 million households to help with the cost of childcare, enabling more parents to go out to work, if they want to, to provide greater security for their families. Here’s the top ten things to know about the scheme…

1. Open an online account
You can open an online account, which you can pay into to cover the cost of childcare with a registered provider. This is done through the government website, GOV.UK.

2. For every 80p you (or someone else pays in), the government will top up an extra 20p
This is equivalent of the tax most people pay – 20% – which gives the scheme its name, ‘tax-free’. The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children).

3. The scheme is available for children up to the age of 12
It is also available for children with disabilities up to the age of 17, as their childcare costs can stay high throughout their teenage years.

4. To qualify, parents have to be in work, and each earn around £115 a week and not more than £100,000 each per year
The scheme is designed to be flexible for parents if, for example, they want to get back to work after the birth of a child or work part-time.

5. Any eligible working family can use the Tax-Free Childcare scheme – it doesn’t rely on employers offering it
Tax-Free Childcare doesn’t rely on employers offering the scheme, unlike the old Employer-Supported Childcare scheme. Any working family can use Tax-Free Childcare, provided they meet the eligibility requirements.

6. The scheme is available for parents who are self-employed
Self-employed parents can get support with childcare costs with the Tax-Free Childcare scheme, unlike the old Employer-Supported Childcare scheme which is not available to self-employed parents.

The scheme is also be available to parents on paid sick leave and paid and unpaid statutory maternity, paternity and adoption leave.

7. Parents and others can pay money into their childcare account as and when they like
This gives you the flexibility to pay in more in some months, and less at other times. This means you can build up a balance in your account to use at times when you need more childcare than usual, for example, over the summer holidays.

It’s also not just parents who can pay into the account – if grandparents, other family members or employers want to pay in, then they can.

8. The process is as simple as possible for parents
The process is light-touch and as easy as possible for you. You must re-confirm your circumstances every three months via a simple online process; and there is a simple log-in service where parents can view accounts for all of their children at once.

9. You can withdraw money from the account if you want to
If your circumstances change or you no longer want to pay into the account, then you’ can withdraw the money you have built up. If you do, the government will withdraw its corresponding contribution.

If you need help with any tax issues please contact us, we’d be happy to assist you. Call 0161 707 1500 or use our contact form.

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