Sunday 19th May 2024

What is the tax-free childcare scheme? 

Finance Dee gets to grips with tax-free childcare, how it works, and who can benefit from the Government scheme

tax-free childcare system

For parents in the UK, childcare is often one of those inevitable but dreaded costs. Thankfully, there is some help available to many families in the UK to help with the expense.

Tax-free childcare is a Government scheme which replaced the former childcare voucher scheme, and is open to working parents of children 11 and under (or 17 and under for disabled children). 

How much could I get? 

The Government contributes 20% of childcare costs, capped at a maximum of £500 every three months or £2,000 per year, for each child. In other words, for every £8 you put into the tax-free childcare account, the government will top it up with £2 until the cap is reached. 

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For children with a disability, this goes up to £1,000 every three months, up to a maximum of £4,000 a year. 

Am I eligible? 

There are a number of criteria to assess eligibility listed on the Government website. At a quick glance, to be eligible you must:  

  • Be a British or Irish citizen, or have settled or pre-settled status 
  • Be in employment (including self-employment) 
  • Over a three month period, earn at least: 
  • £1,098 if you’re under 18 or an apprentice 
  • £1,557 if you’re aged 18 to 20 
  • £2,117 if you’re aged 21 or 22 
  • £2,167 if you’re aged 23 or over 
  • Not be receiving working tax credit, child tax credit, universal credit, or using childcare vouchers from the previous scheme 

How do I access the funds? 

Via the Government website, you will first need to have or create a government gateway account, which will then allow you to open a childcare account. To open the childcare account, you will be asked a number of questions about yourself to verify your identity and assess your eligibility, including your national insurance number and employment status.

You will also be asked about your partner (if applicable), and information about the child or children you’re applying for will need to be provided. It is good to have all information to hand before starting the process as it does eventually time-out for security reasons. 

Once you have completed the application, you will be notified when your account is ready for use, assuming you are eligible. Please note, if you apply for tax-free childcare whilst on maternity, paternity or parental leave, you can only start using the account in the last 31 days of your leave. 

Do all childcare facilities accept this payment? 

Funding can be used for any approved childcare facility, which can include: 

  • A registered childminder, nanny, play scheme, nursery or club 
  • A registered school 
  • Or a home care worker working for a registered home care agency 

Once your tax-free childcare account is opened, you will be able to check whether your preferred childcare provider accepts funding via this scheme. Alternatively, you can simply ask the provider ahead of time which type of funding they do or do not accept. 

Photo Credits: Pexels

Finance Dee

Mouthy Blogger

Finance Dee is a British-Jamaican living in the SE of England. By day she's a research consultant and by night a finance YouTuber and FIRE blogger

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