Up to 300,000 eligible UK households are failing to claim a government childcare top-up worth up to £2,000 per year, according to Martin Lewis's MoneySavingExpert (MSE). The scheme, officially called Tax-Free Childcare, provides working families with a 20% top-up on childcare costs, effectively giving £5 for every £8 paid into a dedicated account.
How the Tax-Free Childcare Scheme Works
For each child under age 11, families can receive up to £500 every three months, totalling £2,000 annually. For disabled children, the limit rises to £1,000 per quarter, or £4,000 per year. The top-up is paid directly by the government into a Tax-Free Childcare account, which can then be used to pay registered childcare providers.
MSE highlighted the issue in its latest money tips email, stating: “300,000 homes miss out on up to £2,000/yr via the 'Working Family Childcare Top-up' scheme.” The consumer group has long campaigned for a name change, arguing the official title is misleading. “It has little to do with tax, and isn't tax-free. In reality, it's a top-up to help working families pay for childcare,” MSE added.
Eligibility Criteria
To qualify, parents must be at least 16 years old, in paid work, and have an expected adjusted net income below £100,000. Over the next three months, parents must each expect to earn at least the National Minimum Wage or Living Wage for 16 hours per week on average. This translates to £2,643.68 before tax for those aged 21 or over, £2,256.80 for those aged 18-20, and £1,664 for those under 18 or apprentices. Self-employed individuals who started their business less than 12 months ago can earn less and still be eligible.
Parents cannot claim Tax-Free Childcare if they are receiving Universal Credit, Working Tax Credit, Child Tax Credit, or Childcare Vouchers. However, those not currently working may still qualify if their partner is working and they receive certain benefits such as Incapacity Benefit, Severe Disablement Allowance, Carer's Allowance, or contribution-based Employment and Support Allowance.
How to Apply
Applications can be made online via the Childcare Choices website. Parents can apply if they are starting or restarting work within the next 31 days. The top-up is available for children until September 1 after their 11th birthday, or until September 1 after their 16th birthday if the child is disabled. Tax-Free Childcare can also be claimed alongside the 30 hours free childcare for working parents.
MSE concluded: “If you're eligible and your childcare provider takes payments from Tax-Free-Childcare (ask it), it's a no-brainer.”
