Quick Guide to Tax-Free Childcare
Perhaps you have heard of Tax-Free Childcare or you may have recently read news headlines about families missing out on £2,000 in free childcare each year. The two are linked and, indeed, over a million families do miss out each year, despite being eligible for this free childcare funding. So, what exactly is Tax-Free Childcare, are you eligible to receive it and, if so, how do you go about claiming it? Today, we answer all such questions in our “Quick Guide to Tax-Free Childcare”. Take a look and you may find that your family is eligible to claim as much as £2,000 towards childcare costs each year — even more if your child is disabled.
What Exactly is Tax-Free Childcare?
Put simply, Tax-Free Childcare is a scheme that results in the Government paying as much as 20% towards your childcare costs (or as much as 40% if the child is disabled).
Example
Let’s say that your childcare fees this quarter are £2,500. Under the Tax-Free Childcare scheme, you would only pay £2,000 and the Government would chip in £500 to make up the difference. (For those with a disabled child, the family would pay just £1,500 and the Government £1,000). It’s virtually as simple as that for those who are eligible and who have correctly set up what’s known as a Childcare Account with the Government (more about that later).
Are You Eligible for Tax-Free Childcare?
In order to be eligible to claim under the Tax-Free Childcare scheme, a few rules apply …
- You must be a working UK family (whether employed or self-employed).
- You (as the parent) and your partner, if you have one, must be at least 16 years of age.
- The child for whom you are claiming must be no older than 11, or no older than 16 if they’re disabled.
- You must not be in receipt of Working Tax Credit, Child Tax Credit, Universal Credit, a childcare bursary or grant, nor be using Childcare Vouchers.
- You and your partner, if you have one, each expect to earn at least £152 per week on average over the next 3 months (the equivalent of working 16 hours a week on the National Minimum Wage (NMW) or National Living Wage (NLW), which are both £9.50 per hour for the year starting 1st April 2022).
- Neither you nor your partner, if you have one, are expected to individually earn £100k or more.
- The child for whom you are making the claim must usually be living with you.
- Adopted children are eligible too (however, fostered children are not).
There are a few potential exceptions to the above rules. You may still be eligible to claim Tax-Free Childcare if, for example, you or your partner:
- are on maternity, paternity or adoption leave (but are not claiming Tax-Free Childcare funding for the child you are on leave for);
- are disabled and not therefore able to work;
- are officially responsible for caring for another individual.
Without getting into too much detail in this quick guide, there are a few additional exceptions and rules around eligibility for a small number of specific scenarios. For example, perhaps you are not working, so might not otherwise have been eligible, but expect to begin working within the next 31 days. In that case, you may still be eligible to apply. Your immigration/citizenship status may also affect eligibility.
How Much Does the Government Pay?
The Government contributes up to £2k in Tax-Free Childcare per eligible child per year, or up to £4k per year per child if they are disabled. That equates to a Government contribution of £500 or £1000 maximum per quarter respectively.
You don’t directly receive the Government’s contribution yourself; it is paid direct to the childcare provider, who must be registered with the scheme. Providers must also be registered with the Early Years Register, Ofsted or with the Childcare Register in order to be eligible. So long as they are registered as above, they can be nurseries, pre-schools, childminders, nannies, breakfast clubs, after school clubs or even play schemes and summer camps. Leaps and Bounds Day Nursery is registered with Ofsted and with the Tax-Free Childcare scheme, so is an eligible childcare provider under the scheme.
How Do You Claim Tax-Free Childcare?
In order to claim the Tax-Free Childcare contributions, you will first need to open a Childcare Account on the Government website. You can begin your Tax-Free Childcare application here and your application need take no longer than about 20 minutes or so to complete, particularly if you have the right information to hand (follow the link for details). You’ll usually find out right away if you’re eligible.
Added Bonus: An added bonus when opening an account is that you can claim for 30 hours of free childcare for 3-4-year-olds, if eligible, at the same time as claiming for your Tax-Free Childcare. That’s a lovely bonus if you happen to have a child of that age and they are eligible for that childcare funding scheme too.
What Happens Once You Have a Childcare Account?
Once you have successfully set up a Childcare Account, you will need to make your own contributions into the account before the Government will make theirs. How much you pay in – and how often – is up to you. However, you will probably want to plan this carefully so that what you pay is affordable whilst also attracting the maximum possible Government contributions.
How is the Childcare Provider Paid?
Once cleared, the childcare provider will be able to call off their fees, as appropriate, from the account. The funds, however, cannot be used for anything other than childcare costs with the approved provider(s).
You will need to re-affirm your details each quarter in order to confirm that you are still eligible. You will usually receive emailed reminders about the need for this.
Funded Childcare Options at our Edgbaston Nursery near Birmingham
Our Edgbaston nursery & pre-school supports free childcare funding schemes & childcare vouchers.
Our exceptional nursery and pre-school in Edgbaston, Birmingham. supports free childcare places and childcare funding for those who are eligible under the Government schemes. That includes valid/recognised childcare vouchers, free childcare for eligible 2-year-olds, free childcare for 3 & 4-year-olds, student childcare grants and, of course, Tax-Free Childcare. As well as being close to Birmingham, we’re also very near to Harborne, Ladywood, Bearwood and Smethwick, so would be conveniently located if you live or work in those locations.
Register for a nursery place for your child at Leaps & Bounds Nursery, book a guided visit with your little one or ask us any questions and we’ll be happy to help:
Information correct at time of writing (October 2022).
