Raising children is rewarding but can be costly, especially when it comes to childcare. Thankfully there are various option how you can reduce your childcare bills and one of them is a government scheme called Tax-Free Childcare. Here’s a clear and simple guide to help you understand how it works and how it can benefit your family.
What is Tax-Free Childcare?
Tax-Free Childcare is a government initiative designed to help working parents with the cost of childcare. Under this scheme, for every £8 you pay into your online childcare account, the government adds an extra £2. This means you can get up to £500 every three months (or £2,000 a year) for each of your children.
If your child is disabled, this support increases to £1,000 every three months (or £4,000 a year).
How Does It Work?
To use Tax-Free Childcare, you first need to set up an online account for your child. After registering, you can pay money into this account, and the government will top it up with 20% of what you pay in. You can then use this money to pay for approved childcare providers, such as:
Childminders
Nurseries and preschools
Nannies
After-school clubs, breakfast clubs and play schemes
Make sure your childcare provider is signed up for the scheme before you make payments. If they’re not signed up, you won’t be able to use the funds from your Tax-Free Childcare account to pay them.
Eligibility Criteria
To be eligible for Tax-Free Childcare, you and your partner (if you have one) need to meet certain criteria:
1. Employment Status: You must be in work (this includes being on sick leave, annual leave, or parental leave) or planning to start work within the next 31 days. If you’re not currently working, you might still be eligible if your partner is working and you receive certain benefits.
2. Income: Over the next three months, you and your partner must each expect to earn at least:
£2,379 if you’re 21 or over
£1,788 if you’re aged 18 to 20
£1,331 if you’re under 18 or an apprentice
3. Your Child’s Age: Your child must be 11 or under (or 16 if they are disabled). They stop being eligible on 1 September after their 11th birthday (or 16th birthday for disabled children).
4. Immigration Status: You must have a National Insurance number and meet certain residency requirements, such as having British or Irish citizenship or settled status.
Special Considerations for Disabled Children
If your child is disabled, you can use the additional support provided by Tax-Free Childcare to cover extra childcare costs or to help your provider purchase specialist equipment, such as mobility aids. This extra help can make a significant difference in ensuring your child receives the care they need.
Using Tax-Free Childcare with Other Schemes
You can use Tax-Free Childcare alongside 15 or 30 hours of free childcare, provided you meet the eligibility criteria for both. However, you cannot use Tax-Free Childcare if you are also receiving Working Tax Credit, Child Tax Credit, Universal Credit, or childcare vouchers. It’s important to compare these options to see which one offers the most benefit to your family.
How to Apply
Applying for Tax-Free Childcare is straightforward. Simply apply online through the government’s website: www.childcarechoices.gov.uk If you have a partner, you’ll need to include their details in the application as well. It is important to mention that if you do apply for Tax Free Childcare whilst in receipt of Universal Credits, Working Tax Credits or Child Tax Credits – you may lose these benefits if your application is approved.
Final Thoughts
Tax-Free Childcare is a valuable resource for parents, offering significant financial support for those balancing work and childcare responsibilities. By taking advantage of this scheme, you can reduce the burden of childcare costs and ensure your child receives the best care possible. Do you need furher support, feel free to contact us
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