Tax free childcare

What is tax-free childcare?

Tax-free childcare is a UK government scheme designed to help working parents cover childcare costs, which are only getting more expensive. This includes parents of children aged under 12 (or aged between 17 and 18 if they are registered as disabled with HMRC). 

The way it works is that parents can open an online childcare account, and for every £8 spent on eligible childcare (more on this below), the government will pay £2. Essentially, you can claim up to £500 every 3 months (that’s up to £2,000 a year) for each of your children. This goes up to £1,000 every 3 months (£4,000 a year) if your child is disabled.

Who is eligible for tax-free childcare?

Whether you’re eligible depends on a few things.

Your working status

If you’re working, it’s likely you’ll be eligible for tax-free childcare regardless of whether you (and your partner, if you have one) are actively working, on sick leave or parental leave. If you’re on adoption leave, however, you can’t apply for the child you’re on leave for unless you’re going back to work within 31 days of the date you first applied.

If you’re not currently working, you might still be eligible if your partner is working and you’re claiming some type of government benefit or support allowance.

Your income (and your partner’s, if applicable)

Over the next three months, you and your partner (if you have one) must be earning at least the National Minimum Wage or Living Wage for 16 hours a week on average.

Your child’s age and circumstances

Your child must be no older than 11 years old and live with you most of the time. On the 1st September after their 11th birthday, they’ll no longer be eligible.

It’s worth noting that adopted children are eligible, but foster children are not.

If your child is disabled, you could get up to £4,000 a year until the 1st September after their 16th birthday. They’re considered eligible if they receive a Disability Living Allowance, Personal Independence Payment, Armed Forces Independence Payment, Child Disability Payment (Scotland only) or Adult Disability Payment (Scotland only), or are certified as blind or severely sight-impaired.

Your immigration status

To be eligible for tax-free childcare, you must have a National Insurance (NI) number (if you can’t find yours, follow these steps). You’ll also need at least one of the following:

  1. British or Irish citizenship
  2. Settled or pre-settled status (it’s fine if you’ve applied and you’re waiting for a decision)
  3. Permission to access public funds (your UK residence card will tell you if you can’t do this)

If you have a partner, they must also have a National Insurance number.

How to apply for tax-free childcare

You’ll need to apply on the government's website before any childcare costs are paid out. 

The process is simple: you’ll be asked to provide your bank details, your NI number and your child’s NI number or Unique Taxpayer Reference (UTR). You will also need to give the details of your employer and the childcare provider you plan to use.

Ready to apply? Follow the steps here – it takes roughly 20 minutes.

What are the benefits of tax-free childcare?

Unsurprisingly, the main benefit of tax-free childcare is the cost savings. As a parent, you could get £2 from the government for every £8 you spend on approved childcare. 

This can really add up, making childcare more affordable and making the return to work that bit easier. It’s also flexible, so you can use it whenever and however you need it (as long as you are using eligible childcare).

What types of childcare are available tax-free?

Bear in mind that this UK scheme only applies to approved childcare providers, such as registered childminders, nannies, nurseries, crèches, playgroups, and before or after-school clubs. Learn more about the types of approved childcare here.

You can also use tax-free childcare to pay for additional activities such as dance lessons or swimming classes – even some holiday camps. Once you’ve created an account, you’ll be able to see the details of all the registered providers.

Head to the government website if you’d like to apply for tax-free childcare.

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