Tax-Free Childcare – who can benefit?
Jul 07, 2017
News Personal Finance
The government’s Tax-Free Childcare scheme is designed to fund up to £2,000 per child per year, and it has finally been launched following considerable delay. If you’re self-employed, or if you’re an employee but don’t benefit from an Employer Provided Childcare scheme, then listen up – this is probably going to be of most value to you.
What is Tax-Free Childcare?
Tax-Free Childcare is an online scheme which requires eligible parents to open an online childcare account. As a parent, whenever you pay into the account the government will pay in an additional 25%. The maximum the government will fund is £2,000 per child per year – that’s up to £500 every three months. This means annual childcare costs of £10,000 per child can be met by £8,000 of parental contributions and £2,000 by the government. It’s up to you as the parent to decide how much you want to pay into your Tax-Free Childcare account and when.
Who is eligible for Tax-Free Childcare?
You need to be a ‘working parent’ paying for ‘registered childcare’ with children under 12 (or under 17 if disabled). If both parents are not living together, the qualifying parent is the one with whom the child normally lives.
Your main criteria as a parent (and your partner if applicable) are:
- you earn on average at least £120 a week
- you earn less than £100,000 a year
- you are not receiving other support for childcare such as Child Tax Credits
If you’re self-employed, you can average out your self-employment income across the year to meet the minimum income requirement.
The government has recently launched a new website called Childcare Choices which aims to guide parents through the various types of help which are available to them.
Currently if you have a child under four or a child with a disability you can apply through this Childcare Choices site. You will be able to apply for all your children at the same time when your youngest child becomes eligible. Alternatively you can request to receive an email from the government when you’re eligible to apply. All eligible parents will be able to join the scheme by the end of 2017.
This Tax-Free Childcare scheme is a good alternative if you cannot access Employer Provided Childcare. However be aware that the scheme is not operated by employers, and therefore the onus is entirely on you as the parent to apply for your own childcare account.