Are You Claiming Tax-Free Childcare?

HMRC has issued a reminder to families to register for tax-free childcare. The scheme offers savings of up to £2,000 a year on childcare costs  As of September 2022 more than 400,000 families were using the scheme but this is only about half those who are eligible.

To qualify for tax-free childcare, you and your partner (if you have one) must earn the equivalent of at least the national minimum or living wage for 16 hours per week. The benefit is not available for those earning over £100,000 a year. You may still be eligible to make a claim if your partner is working and you get Incapacity Benefit, Severe Disablement Allowance, Carer’s Allowance or Contribution-based Employment and Support Allowance. You can claim for children aged 11 or under or aged up to 16 if the child has a disability.

The scheme helps to cover the costs of approved childcare provided by nurseries, childminders, breakfast or after school clubs, holiday care and out of school activities.

For every £8 paid into an online account, families will automatically receive an additional £2 from the UK Government. You can receive up to £500 every 3 months (£2,000 a year) for each eligible child, or £1,000 (£4,000 a year) if your child is disabled.

Each eligible child requires their own tax-free childcare account. If you have more than one eligible child, you will therefore need to register an account for each child. The 20% UK Government top-up is then applied to deposits made for each child, not per household.

Account holders must confirm their details are up to date every three months to continue receiving the UK Government top-up.

Note if you currently receive Childcare vouchers, you must tell your employer within 90 days of applying for Tax-Free Childcare to stop your childcare vouchers or directly contracted childcare.

More detailed information on the scheme is available on the HMRC website:-

Tax-Free Childcare – GOV.UK (www.gov.uk)

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.