You are aware of the cost of your daycare.
But your struggling to work out how much you need to pay into your account to get the governments contribution to total that amount?
Then this Tax-Free Childcare calculator is for you!
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Calculate the amount the Government will contribute towards your childcare
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Tax-Free Childcare: A Guide to Financial Assistance for Families
Tax-Free Childcare is a government program in the UK designed to help families manage the costs of childcare. If you’re eligible, this scheme can provide significant financial support for each child, making childcare more affordable. This article outlines everything you need to know about the Tax-Free Childcare scheme, including eligibility criteria, what it covers, and how to apply.
What is Tax-Free Childcare?
The Tax-Free Childcare scheme allows families to claim up to £500 every three months (or up to £2,000 a year) per child for childcare expenses. For families with disabled children, this support increases to £1,000 every three months (up to £4,000 a year). The government contributes £2 for every £8 a family spends on approved childcare services. This assistance is deposited into an online account that you set up specifically for your child.
You may also be eligible for 15 or 30 hours of free childcare, and it’s possible to receive Tax-Free Childcare alongside these free hours.
What Can Tax-Free Childcare Be Used For?
Tax-Free Childcare funds can be used for a range of approved childcare services, including:
- Registered childminders, nurseries, and nannies
- After-school clubs and play schemes
It’s important to confirm that your childcare provider is signed up to the Tax-Free Childcare scheme. You won’t be able to benefit from the scheme unless your provider is registered.
Additional Support for Disabled Children
Families with disabled children can use the additional funds to cover extra hours of childcare or even to help purchase specialist equipment, such as mobility aids. Talk to your childcare provider about what they can offer to support your child’s needs.
Eligibility Requirements for Tax-Free Childcare
Employment Status
Your eligibility for Tax-Free Childcare depends on your employment situation. You (and your partner, if applicable) must be:
- Working (employed, self-employed, or a director)
- On sick leave or annual leave
- On shared parental, maternity, paternity, or adoption leave with plans to return to work within 31 days of your application date
If you’re not currently working but your partner is, you may still be eligible if you receive one of the following:
- Incapacity Benefit
- Severe Disablement Allowance
- Carer’s Allowance (or Carer Support Payment in Scotland)
- Contribution-based Employment and Support Allowance
Income Requirements
To qualify, you and your partner (if applicable) must each expect to earn at least:
- £2,379 over the next three months if you’re aged 21 or over
- £1,788 if you’re aged 18 to 20
- £1,331 if you’re under 18 or an apprentice
If you’re self-employed and started your business within the last year, you may qualify even if your income is below the minimum threshold. Certain income types do not count towards the eligibility threshold, such as dividends, rental income, pension payments, and interest from investments.
You will not qualify if either you or your partner expects to have an adjusted net income over £100,000 in the current tax year.
Eligibility Based on Your Child’s Age
The Tax-Free Childcare scheme is available for children aged 11 or under who usually live with you. Eligibility for assistance continues until 1 September following their 11th birthday.
For disabled children, assistance is extended until 1 September following their 16th birthday. Disabled children qualify if they receive any of the following:
- Disability Living Allowance
- Personal Independence Payment
- Armed Forces Independence Payment
- Child Disability Payment (Scotland only)
- Adult Disability Payment (Scotland only)
Immigration Status
To qualify for Tax-Free Childcare, you must have a National Insurance number and meet at least one of the following conditions:
- Hold British or Irish citizenship
- Have settled or pre-settled status
- Hold permission to access public funds, as indicated on your UK residence card
If you work in the UK but live in an EU country and meet the requirements of a “frontier worker,” you may also be eligible.
Restrictions and Additional Support Options
Tax Credits, Universal Credit, and Childcare Vouchers
You cannot claim Tax-Free Childcare if you also receive Working Tax Credit, Child Tax Credit, Universal Credit, or childcare vouchers. It’s worth using a childcare calculator to find out which support option best suits your needs.
- Tax Credits: If you apply for Tax-Free Childcare, any Working or Child Tax Credits will end immediately, and you cannot reapply.
- Childcare Vouchers: Notify your employer within 90 days if you decide to switch from vouchers to Tax-Free Childcare. You may need to provide HMRC with proof that you’ve left the childcare voucher scheme.
Childcare Bursaries or Grants
If you or your partner receive a childcare bursary or grant, you cannot apply for Tax-Free Childcare.
How to Apply for Tax-Free Childcare
You can apply for Tax-Free Childcare online. If someone else is already claiming free childcare hours for your child, those hours will end at the end of the current term, allowing you to receive support through the Tax-Free Childcare scheme instead.
Additional Considerations for Families with Partners
If you live with a partner, you must include their information on your application. Only one account is allowed per child, so separated parents will need to decide who should apply. If no agreement is reached, HMRC will make the final decision.
To check your eligibility or apply, visit the government website today. Tax-Free Childcare can make a substantial difference in managing childcare expenses, helping families afford the support they need.