Thousands of working parents in Wales are being urged to look again at the Tax-Free Childcare scheme, which HM Revenue & Customs says could cut monthly bills by close to £100. The reminder comes as families manage summer childcare and plan for the next school term, when costs often rise with wraparound care.
How the scheme works
HMRC highlighted Tax-Free Childcare this week, a scheme that helps cover the cost of nurseries, registered childminders, breakfast clubs, after-school provision, and holiday clubs. Eligible families can receive a government top-up towards approved childcare, giving budgets a boost during school holidays and throughout the year. The tax break can be used flexibly, depending on the type of care needed and when.
Under the scheme, eligible families can get up to £2,000 a year per child, rising to £4,000 for a disabled child, by opening a dedicated account. For every £8 parents pay in, the government adds £2, effectively a 25% top-up towards approved childcare costs. That means families can receive up to £500 in government top-ups every three months per child, or £1,000 every three months if the child is disabled.
Wider usage and provider reach
HMRC said almost 75,000 childcare providers are now registered to accept Tax-Free Childcare payments. New figures also show more parents of older children are using the scheme: the number of families using it for children aged eight and over has increased by more than 20% compared with a year earlier.
Myrtle Lloyd, HMRC's Chief Customer Officer, said: "Tax-Free Childcare can help with your summer childcare plans and, looking to the term ahead, with whatever type of care you require for your child. If you haven't signed up already, do it today so you don't miss out. Go to GOV.UK and search 'Tax-Free Childcare'."
Who can claim?
Working families may qualify if they have a child aged 11 or under (or under 16 if the child is disabled), each parent earns at least the equivalent of 16 hours a week at the National Minimum or Living Wage on average, neither parent earns more than £100,000 a year, and they are not receiving Universal Credit or childcare vouchers.
Parents can pay into the account and spend it straight away, or leave money there until bills are due. Any unused funds can be withdrawn if not needed. The scheme can also be used alongside the government's funded childcare hours, as long as families meet the eligibility rules for both. With childcare remaining one of the biggest pressures on household budgets, HMRC is urging families who think they might qualify to check before the new school term begins.
