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Tax Free Childcare

Last Updated 03/07/2019

The Tax-Free Childcare offer is a scheme  launched by the Government alongside the additional 15 hours free childcare for working parents. This scheme is designed to help working families with their childcare costs.

Visit the government's Childcare Choices page for more information by clicking the link to the right.


Please note that by claiming tax-free childcare you will NOT be able to claim tax credits, universal credit or childcare vouchers. HMRC have developed a cost calculator to check which scheme is the most cost effective for you. Please ensure you use this tool to find out which is better for you. You can find it here.


Things parents should know about Tax-Free Childcare


If you have been unable to access tax free childcare through your childcare account due to technical reasons, you may be able to claim compensation, by receiving the government top-up as a one-off payment. HMRC will also consider refunding any reasonable costs directly caused by their mistakes or unreasonable delays.

For more information visit HMRC's Childcare Service compensation page.

What is the Tax Free Childcare Scheme?

Tax-Free Childcare is a government scheme to support working parents with their childcare costs.

Parents will be able to open an online childcare account to pay for their registered childcare provision directly. The scheme is available for childcare for children up to the age of 12 years and 17 years if the child has a disability.

For every £8 a parent pays into the account it will be matched by an additional £2 from Central Government. The total amount of money in the account however can only be spent on childcare.

Parents will receive up to £2,000 per child in Government support per year or £4,000 for a child with a disability. You will need to sign up for an account to ensure your provider can be paid from the fund.

Tax-Free Childcare can be used to pay for:

  • Registered childminders, nurseries and nannies
  • Registered after-school clubs and playschemes
  • Registered schools
  • Home care workers working for a registered home care agency

How do parents qualify?

You may be eligible if all of the following apply:

Your child:

  • is under 12, or 17 if they're registered as having a disability
  • usually lives with the parent

 

You (and your partner, if you have one):

  • are 16 or over
  • live or work in the UK, unless you are a Crown servant or member of the HM Armed Forces posted overseas
  • are employed or self-employed
  • expect to earn £120 a week on average (or the equivalent of 16 hours at National Living Wage) unless you’re in your first year of self-employment
  • earn less than £100,000 each a year each
  • don't get other support with your childcare, including from a childcare voucher or salary sacrifice scheme
  • do not claim Universal Credit or tax credits (either Working Tax Credits or Child Tax Credits – both will be stopped if you successfully apply for Tax-Free Childcare)

 

You may also be eligible if you have a partner and either of you receive any of the following benefits:

  • Carers Allowance
  • Employment and Support Allowance
  • Incapacity Benefit
  • Severe Disablement Benefit

 

You can also apply for Tax-Free Childcare if you're not working but expect to start a new job in the next 14 days.

How does it work?

For Parents:

Parents will have an on-line account rather like a bank account.

For every £8 a parent pays into the account it will be matched by an additional £2 from Government. They will be able to monitor how much they have paid into the account and how much they have spent on each child. The top up from the Government will be added to the account on the same day the parent credits it and the whole amount will be available to spend on childcare.

For Childcare Professionals

Childcare Providers will have to sign up for Tax-Free Childcare and this will permit parents to pay directly to your bank account. Parents will find making payments from the tax free payment account will work in the same way as if they had made a payment via an online banking system.

Every child will have its unique ID number and this will enable providers to track which payments are for which child.

How do Parents sign up?

Parents will be able to open an account which they can pay into for the cost of childcare with a registered provider. This account will be set up through the Government website Gov.uk

The childcare service launched in April 2017 and is being rolled out to parents by age of child, starting with parents of the youngest child. If you have more than one child, you will be able to apply for all your children at the same time once your youngest child becomes eligible. You can find out who the service is currently available to at www.childcarechoices.gov.uk and you can also sign up to receive an email alert to notify you when your youngest child is eligible for Tax-Free Childcare.

How do Childcare Providers sign up?

You will receive a letter from Government containing your unique ID and you need this to start the online process.

Once you have accessed the secure site you will need your:

  • User ID from your invitation letter - if you didn’t get one, contact the HMRC helpline
  • Bank account details
  • Unique Taxpayer Reference (UTR), if you’re registered for Self Assessment or Corporation Tax
  • National Insurance number, if you’re a nanny

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