Working parents and guardians can currently get up to £2,000 per child, per year, towards childcare costs. Under the government’s tax-free childcare scheme, eligible claimants may receive government top-ups of £2 for every £8 that they pay into a tax-free childcare account, up to a maximum of £2,000 per child (or £4,000 for disabled children), subject to an overall maximum limit of £10,000. The scheme is open to all working parents across the UK with children under 12, or under 17 if disabled.
Claims are made by opening an online account, where the claimant can decide how much to pay in and how often, giving flexibility to pay in more in some months, and less at other times. Money can be withdrawn at any time but the government contribution will be lost.
To qualify for the government contribution, account holders will usually have to be in work, expecting to earn at least the National Minimum Wage (NMW) or Living Wage (LW) for 16 hours a week on average, over the next 3 months. Self-employed people who do not expect to make enough profit in the next 3 months can use an average of how much they expect to make over the current tax year. Additionally, the earnings limit does not apply to self-employed individuals who started their business less than 12 months ago.
The Childcare Choices website includes a childcare calculator for parents to compare all the government’s childcare offers and check what works best for their families, including the 30-hour free childcare offer, tax-free childcare or universal credit.
Written by the Tax Advice Network