Tax Free Childcare
12 September 2019
Tax-free childcare is a government scheme that aims to help working parents with the cost of childcare. Eligible parents can get up to £2,000 per child per year (a maximum of £500 per quarter), or £4,000 for children with disabilities (maximum £1,000 per quarter).
For every £8 a parent pays into their online childcare account, the government will pay in £2. For example, if childcare costs are £800 per month, the working parent will need to pay £640 into their childcare account to receive a government top up account with £160.
Parents can use Tax-Free Childcare to pay for qualifying childcare. This is any childcare or supervised activity not provided as part of a child’s compulsory education, for example, by:
- Regulated childminders, nurseries and nannies
- Regulated pre and after-school clubs, holiday clubs and play schemes.
Working parents need to be:
- over 16 and live in the UK
- in paid work (either as an employee, including as a company director, or self-employed)
- expecting to earn on average, the equivalent of at least 16 hours a week at the National Minimum Wage or Living Wage for the next 3 months
- expecting to have an ‘adjusted net income’ that is not over £100,000 in the current tax year.
If the parent is taking parental leave, Tax-Free Childcare can only be used for other children but not the child that the parental leave is being used leave for.
The child must be 11 or under and normally live with the working parent/s (16 if disabled).
Further information together with a calculator can be found at www.childcarechoices.gov.uk.
To continue getting Tax-Free Childcare the working parent will need to confirm their eligibility every 3 months.
Low Income Tax Reforms Group (LITRG) provide comprehensive guidance to working parents to help understand their entitlements which can be found at the LITRG website.
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