Tax-Free Childcare: Are You Due £2,000 for Childcare? Our Guide

Each year, around 1 million families miss out on thousands of pounds in free childcare funding — despite being eligible through the Government’s Tax-Free Childcare scheme. Are you one of them?

In today’s guide, we take a look at Tax-Free Childcare, which could effectively contribute anywhere from £2,000 to £4,000 per child, per year, towards childcare costs for eligible families. Those are significant sums, which could really help families, especially with the rising cost of living. The funding is there for for the taking if you’re eligible So, don’t miss out!

Let’s take a look.

What is Tax-Free Childcare?

In effect, the Tax-Free Childcare scheme subsidises childcare costs by utilising the tax that eligible families would ordinarily have pre-paid on the taxed income they use to pay for childcare. Specifically, the Government will add an extra £2 for every £8 that eligible families pay into a special account used childcare costs — even more if the child has disabilities. We’ll explain more about the childcare account later, but the good news is that you can get as much as £2,000 per child per annum if you’re eligible, or up to twice that if your child has disabilities. That’s a lot of money!

Who is Eligible for Tax-Free Childcare?

Families, including single parent families, are usually eligible for tax-free childcare scheme if they meet the following criteria:

The claimants are working (employed or self-employed) in the UK;
They each earn under £100,000 per annum;
They each earn at least £152 per week, which is £1,976 over the next 3 months (the equivalent of 16 hours per week at the National Minimum Wage or National Living Wage at time of writing);
They are not in receipt of childcare vouchers (which are closed to new applicants anyway), Universal Credit, Tax Credits or a childcare bursary/grant;
Parents/carers/guardians are over 16;
Children for whom they are claiming tax-free childcare is/are no older than 11 years of age or, if they have disabilities, no older than 16;
They should usually be living with the parent/carer/guardian(s) making the claim.

The above list represents the key rules governing eligibility for most families. However, there are some additional rules around eligibility — and some welcome exceptions to the above. Immigration and citizenship status may affect eligibility, for example, and some who are not working may still be eligible for Tax-Free Childcare under certain circumstances. Learn about eligibility rules for Tax-Free Childcare in more detail here.

Many will also be pleased to learn that families can also claim for the 30 Hours of free childcare scheme for 3 and 4-year-olds if they’re also eligible for that.

Which Providers Can Provide Childcare Under the Scheme?

The Tax-Free Childcare contribution from the Government can only be used to pay for childcare provided by approved childcare providers that have signed up to the scheme. Such providers must be registered with either the Early Years Register, the Childcare Register or Ofsted in order to be approved. However, they can be nurseries, childminders, nannies, play schemes or even after school clubs. Little Acorns Nursery is, of course, such an approved childcare provider and would be happy to assist families to make the most of this very useful, free childcare funding opportunity.

How to Apply for Tax-Free Childcare

If you think you are eligible, you can apply for Tax-Free Childcare here. Applications usually take only twenty minutes or so and you will need:

Your Government Gateway User ID (or set one up if you don’t yet have one);
An email address and mobile phone at the ready;
Your own National Insurance number and that of your partner if you have one;
Your Unique Taxpayer Reference number (UTR) if self-employed;
One or more of the following (for you and your partner, if you have one): UK passport, P60, recent pay slip if you are working, Tax Credits confirmation from HMRC.

The application for Tax-Free Childcare will usually confirm right away whether you are eligible for tax-free childcare. It will also confirm if you’re eligible for 30 hours of free childcare for 3 and 4-year-olds, which is an added bonus.

How is it Paid?

A successful application results in the generation of a Childcare Account, held jointly by you and your partner if you have one. You will then need to credit your account with your own payments for childcare provision and the Government will top this up with their contributions, equivalent to 20% of childcare costs worth up to £2,000 per annum (paid as £500 max. per quarter) or £4,000 (paid as £1,000 max. per quarter) if your child has disabilities. Paying your contributions specifically by Bank Transfer will apparently speed up payment of the Government contributions, by the way.

Once funds are showing as available, your childcare provider can be paid for childcare services direct from your childcare account, as either one-off, or regular payments. It cannot be used to pay for anything else and you’ll be required to confirm that your details are still up-to-date each quarter (a reminder will be sent when this is required).

Good luck and do let us know if you need any help or advice in regard to your application.

Little Acorns: the Best Nursery & Pre-School in Clayton, Chorley & Central Lancashire

Our amazing National nursery award and outstanding Ofsted rating prove that we are probably the best nursery and pre-school for babies and under-fives in Clayton-le-Woods, Clayton Green, Clayton Brook, Chorley, Central Lancashire and even beyond. Give your baby, toddler or under-five child the best start in life by choosing the exceptional childcare service from Little Acorns Nursery. For more information or to register for a nursery place, please get in touch. Choose a button below to get started …