Parents spend an average of £13,000 a year on childcare costs for a kid under two! And childcare expenses don’t stop when kids go to school if you need wrap-around care.
Thankfully, you can easily bring the costs down by thousands each year, but many parents aren’t taking advantage.
Whether you pay for nursery fees for your toddler, have breakfast and after school clubs costs, or even payout for summer holiday clubs, you can take advantage of Tax-Free Childcare.
It’s easy to apply, and you can get up to £2,000 per child every year or up to £4,000 a year if your child is disabled. Read on to find out everything you need to know.
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What is tax free childcare?
Instead of paying for the full cost of childcare directly to your provider, you can use the Tax-Free Childcare perk set up by the government.
It’s obvious to see why everyone should take advantage as you can get up to £500 every 3 months for each child (up to £2,000 a year) to help with childcare costs.
If your child is disabled, the amount you get is up to £1,000 per 3 months (up to £4,000 a year per child).
For every £8 you pay into your childcare account, the government pays £2 to your provider – making the childcare so much cheaper for you. Effectively, it’s a 20% top up on anything you pay.
It’s not just for younger kids either, as you can use the scheme right up until your child is 11 years old (or 16 if your child is disabled).
To be eligible, you and your partner need to be earning less than £100,000 a year! So, so many families can take advantage.
As a bonus, you can get the tax free money at the same time as 30 hours of free childcare (if you’re eligible for both).
What you can use Tax-Free Childcare for
You can use tax-free childcare in so many different circumstances.
Whether you’re travelling to or from work, actually working, or maybe even sleeping (during the day) after a night shift, it’s there for any type of approved childcare.
Approved childcare is counted as things like:
- registered childminders
- after school clubs
- breakfast clubs
- play schemes
- holiday clubs and sports activities
- home care worker working for a registered home care agency
If you’re not sure if your childcare provider is approved, you can have a search:
- England through Ofsted
- Wales through Care Inspectorate Wales
- Scotland through the Scottish Care Inspectorate
- Northern Ireland through the local early years team register
You can’t use tax-free childcare if the provider is not registered and if you want to use the money to pay for private tuition during the school day or for paying for private school fees that are part of compulsory education.
If you are in receipt of Working Tax Credit, Child Tax Credit, Universal Credit or childcare vouchers, you aren’t able to get tax free childcare at the same time.
It could be that one option would make you better off than the other. You can use the tax-free childcare calculator to check what’s best for you.
Tax Free Childcare calculator
There are lots of different eligibility criteria, including whether you are working, your income (and your partner’s income, if you have one), your children’s ages and circumstances, and your immigration status.
There’s a whole lot of information you can read through here.
Alternatively, you can quickly work out how much money you’d be eligible to receive using a Tax-Free Childcare calculator here.
You’ll need to enter your working hours and income and information about your children, such as their ages, childcare costs and if they get any disability benefits.
How long does tax free childcare payment take?
Once you’ve got your account set up, you can use it to see the deposits you’ve paid in and out.
You can also set up regular payments to your childcare provider, so it’s all taken care of for you.
It’s fast too, and payments don’t take long.
Payments are usually available immediately or within two hours as they use faster payment methods.
Tax-Free Childcare entitlement period
To get the 20% top-up, you need to meet the conditions set out in an “entitlement period”.
They don’t take it for granted that your circumstances will stay the same all the time, so you need to reconfirm your eligibility each period – even if nothing has changed.
The tax-free childcare entitlement period runs for 3 months at a time.
It always starts on the day HMRC confirm you’re eligible to claim, so the period will usually end and begin on the same day of the month.
To apply, search for “tax-free childcare” on GOV.UK or visit the page directly here.