Personal Tax: Thousands of Parents “Missing Out” on Tax-Free Childcare
HM Revenue & Customs (HMRC) has reminded parents that they may be eligible for Tax-Free Childcare ahead of the new academic year.
HMRC says many families could be missing out on valuable support towards childcare costs. If you are a working parent, here’s a clear summary of how the scheme works and who can claim.
What is Tax-Free Childcare?
Launched in April 2017, Tax-Free Childcare is a Government scheme to help working parents with the cost of approved childcare, including childminders and after-school clubs.
How does Tax-Free Childcare work?
For every £8 you pay into your childcare account, the Government will add £2 (a 20% top-up). You can then use the funds to pay an approved childcare provider.
You can receive up to £500 every three months (up to £2,000 a year) for each eligible child. This increases to £1,000 every three months (up to £4,000 a year) if your child is disabled.
How do I open a childcare account?
You apply and manage Tax-Free Childcare through your online childcare account. Once opened, you can pay money in and use it to pay your childcare provider.
What can Tax-Free Childcare be used to pay for?
The account can be used to pay for approved childcare including:
- Childminders
- Nurseries
- Nannies (where registered/approved)
- After-school clubs
- Holiday clubs and play schemes
Your childcare provider must be signed up to the scheme before you can pay them using the account.
Am I eligible for Tax-Free Childcare?
To claim, you (and your partner, if you have one) generally need to:
- Be working and expect to earn at least the equivalent of 16 hours per week at the National Minimum Wage or National Living Wage (on average over the next three months), and
- Have adjusted net income of £100,000 or less in the current tax year (if either parent expects to exceed this, you will not be eligible).
Eligibility must be reconfirmed every three months to keep receiving the top-up.
You can review the full eligibility criteria here:
Tax-Free Childcare eligibility (GOV.UK)
Can I claim Tax-Free Childcare and 30 hours of free childcare?
Yes. If you are eligible for both schemes, you can claim Tax-Free Childcare alongside 30 hours free childcare (and other free childcare entitlements).
Get advice
If you would like help understanding which childcare support option is best for your circumstances, or you’d like wider tax planning support for your family or business, please get in touch with RMT.