How does Tax-Free Childcare work?
What is it?
Under the Tax-Free Childcare system, you can get quarterly payments of up to £500 per child you have who’s 11 or under – to a maximum of £2,000 a year each.
What can I use it for?
Not just any costs can count for the scheme. Tax-Free Childcare can be used for things like:
- Childminders, nurseries and nannies.
- After-school clubs and play schemes.
- Home care agencies.
In every case, your provider needs to be signed up to the scheme to qualify.
How do I apply for tax-free childcare?
- You need to set up a specialised online account to get things rolling.
- You need to be making at least the £131.36 per week (average out over 3 months) if you’re over 25.
- Again, self-employed people with earnings that go up and down can still qualify. They can use an expected average for the current tax year if they need to.
- For disabled children, the scheme’s available up to the age of 16, with a maximum government contribution of £4,000 per child per year.
How much can I get?
For every £8 you spend on approved childcare costs the government pays £2 into your account – basically wiping out the 20% basic rate of tax on what you’re spending.
Important things to note
One thing to watch out for is that you can’t claim Tax-Free Childcare if you’re on Universal Credit. If you still qualify for older forms of childcare support (like Child Tax Credit or Childcare Vouchers), then you won’t be able to get Tax-Free Childcare on top.
In some cases, you’ll be better off sticking with what you’re already getting, but it’s not always cut-and-dried. If you try to claim Tax-Free Childcare while you’re on tax credits, though, your tax credit claim will end.
You can apply for Tax-Free Childcare online and to get more information about how to apply.