Tax-Free Childcare: Are YOU profiting from £2,000 free money?
- Scheme can be used for nursery, childminders, breakfast and after school clubs
Working parents could receive up to £2,000 to help with childcare costs each year by using a scheme available via HM Revenue & Customs.
Families who have not yet registered for Tax-Free Childcare may be missing out on annual savings of up to £2,000 per child, or up to £4,000 if their child has a disability.
Tax-Free Childcare can help pay for approved childcare for children aged 11 or under, or up to 16 if the child has a disability.
Parents can receive up to £500, or £1,000 if their child is disabled, every three months.
They pay money into an online account to spend on childcare, and for every £8 paid in, they will automatically receive an additional £2 top up from the government.
Tax-Free Childcare can be used to help cover the cost of a child’s nursery, breakfast or after school club, childminder or holiday activity club.
Once an account is opened, parents can deposit money immediately, so it is ready to be used whenever required.
Any unused money in the account can be withdrawn at any time.
Get involved: Working parents could receive up to £2,000 to help with childcare costs this year
Who is eligible?
Certain eligibility criteria applies to families looking to get Tax-Free Childcare.
Families may be eligible for Tax-Free Childcare if they have a child or children aged 11 or under.
It’s important to note that children stop being eligible on 1 September after their eleventh birthday.
However, if the child is disabled they may get up to £4,000 per year until 1 September after their sixteenth birthday.
Eligibility also depends on whether you are working, your income and your partner’s income, if you have one and your your immigration status.
Families could be eligible for Tax-Free Childcare if they earn, or expect to earn, at least the National Minimum Wage or Living Wage for 16 hours a week, on average.
You cannot get Tax-Free Childcare at the same time as claiming Working Tax Credit, Child Tax Credit, Universal Credit or childcare vouchers.
There is an earnings limit on the scheme, which means families are not eligible if one or both of the parents earns £100,000 a year or more.
It means that a two-parent household where both earned £90,000 – a total of £180,000 – would be eligible, while a single-parent household with an income of £100,000 would not.
How to apply
HMRC claims it takes 20 minutes to apply online for a Tax-Free Childcare account.
You can apply for Tax-Free Childcare online. If you are married or in a civil partnership and living together, or not married or in a civil partnership but cohabiting as though you are, you must include your partner in your application.
You will also need your National Insurance number, Unique Taxpayer Reference if you’re self-employed, the British birth certificate reference number for any children you’re applying for, and the date you started or are due to start work.
There are also special rules if you’re registered as a director with HMRC. You will need to show evidence that you meet the minimum income requirements that prove you’re eligible for the scheme. This could be done through PAYE records.
But, if you do not submit regular PAYE information then you may have to provide additional evidence that shows you are working and expect to meet the minimum income requirements for the next three months.
A statement from your accountant, copies of invoices, wage slips, and bank statements may be required.
You may also need to provide year-end payroll, a letter from your tax agent or adviser confirming your salary has been paid and taxed, and annual wage slips.
Comparisons: Price of 50 hours a week for children aged under three at nurseries
Annual nursery costs for children under two fall
Research published by children’s charity Coram Family and Childcare this week revealed that annual nursery costs for a child under two in England have fallen for the first time in 15 years.
The average cost of full-time nursery for a child under two in England is currently £12,425, down 22 per cent on the previous year.
Working parents of children aged under three paid less than half of last year’s cost for a part-time nursery place.
At present, Wales is the most expensive location in Britain for under-twos, at £15,038, Coram said.
The cost of a full-time place for a two-year-old dropped by 23 per cent in England, but increased in Wales and Scotland.
The cost of a full-time place for three and four-year-olds went up in all three nations.
The average price of an after-school club for a week came in at £66.48, while the average price of a childminder after school to 6pm for a week was £81.26 across Britain.
The government has expanded free childcare in England, and eligible parents of all under-fives will be entitled to 30 free hours a week from September.
But, some childcare providers have already said they may have to quit the scheme due to higher costs, leading to fears of a shortage of spaces.
