Tax Free Childcare

What is tax free childcare and am I eligible?

Tax-free childcare is a government scheme set up to support working parents with childcare costs, if eligible, the scheme offers up to £2,000 a year per child. Costs included are nurseries, childminders, and after-school clubs. But although 1.3 million working families are eligible, around 800,000 are currently missing out on this benefit. The scheme is available across the UK in England, Scotland, Wales, and Northern Ireland. Find out if tax free childcare could be right for you and see how much you can save.


The scheme isn’t open to everyone as not everyone is eligible, it all depends on your working status, your income, and your child’s age and circumstances. For those who are already receiving help with childcare costs; signing up for tax free childcare will mean you lose those current benefits. So, to avoid missing out, before reading on be sure to check if you get either universal credit or tax credits. If you get help with childcare costs already through either of these, you will not be able to use the tax free childcare scheme.

Am I eligible for tax free childcare?

How will your working status affect your eligibility?



If you and your partner (if you have one) are both working including if you are self-employed then you will qualify, if you are not working then there are some circumstances where you would still be eligible, these include:


■  On sick or annual leave

■  On shared parental, maternity, paternity, or adoption leave (if you are on adoption leave you cannot apply for the child you are on leave for, unless going back to work within 31 days of the date you applied)


If you are not currently working but your partner is, you may still be eligible if you receive benefits such as incapacity benefit, carers allowance, or severe disablement allowance.


Your partner does not have to be the other parent to qualify, it is all down to who you live with. Therefore, if you are a single parent and your new partner then moves in but does not meet the criteria, you will no longer be able to claim tax-free childcare.



How does your income affect your eligibility?


You (and your partner if you have one) need to both be working and earning a minimum of £152 a week this is at least the National Minimum Wage or Living Wage for 16 hours a week on average.

You both also must earn less than £100,000 a year.


What makes your child eligible?


To qualify, your child must be 11 or under and live with you, they will stop being eligible for the scheme on 1st September after their 11th birthday.

If your child is disabled, then they may be eligible to get up to £4,000 a year until they turn 17 if they:


■ Receive disability living allowance, Child disability payment (Scotland), Personal independence payment, or Armed Forces Independence payment.

■ Are severely sight impaired or certified as blind.

How does tax-free childcare work?

How do you set up an account?


If you are eligible for the scheme, you can set up an online account for your child via the government tax free childcare site which you will use to pay the childcare provider. It should take around 20 minutes to set up and you will need your national insurance number to create the account. You can still get tax free childcare as well as 30 hours of free childcare if you are eligible for both.



How do I make a payment?



You will be able to pay money into the account by setting up a standing order or making a payment using your debit card from your bank account. Other family members such as grandparents and friends can also pay in. It is not possible to pay into the account by setting up a direct debit.


For every £8 you pay into the account, the government will add another £2 to pay your provider, this should usually be the same day you pay into the account. To calculate how much you will get, add 20 per cent on top of what you pay into the account. For example: If you pay £500 into the Tax-Free Childcare account, the government will add another £125 into the account. The amount payable to your provider will then be £625.



How often do you need to reconfirm your details?



You must confirm your details are up to date every 3 months to see if you’re still eligible for tax-free childcare, the process is quick and easy, and you will be given reminders when due or you can check by logging into your account. If you do not reconfirm by the deadline and your childcare bill is due, you will have to pay the full amount without the top-up from the government and risk missing out.

Am I owed Tax back from HMRC?