UK households are being urged to check if they can claim up to £2,000 a year per child towards childcare costs through an HMRC scheme that many may not realize they are eligible for. The reminder comes as HM Revenue and Customs marked Playday, the national day for play, by encouraging parents to sign up for Tax-Free Childcare to help cover the cost of everything from nurseries and childminders to holiday clubs and after-school care.
Average savings and increased usage
Latest HMRC figures show families using the scheme are saving an average of almost £100 a month, while the number of families using it for children aged eight and over has increased by more than 20% compared with the previous year. Eligible families can receive up to £2,000 a year per child, or up to £4,000 a year for a disabled child.
How the scheme works
Under the scheme, the Government adds £2 for every £8 parents pay into a Tax-Free Childcare account. Families can receive up to £500 in Government top-up every three months for each eligible child, rising to £1,000 every three months if the child is disabled. The money can be used straight away to pay childcare costs or left in the account until it is needed. Any unused money can also be withdrawn at any time.
HMRC's call to action
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’."
Provider network and what the money can be used for
HMRC said almost 75,000 childcare providers are now signed up to accept Tax-Free Childcare payments. The scheme can be used to pay for approved childcare, including nurseries, childminders, nannies, holiday clubs, breakfast clubs, after-school clubs, and play schemes. Providers must be approved and signed up to the Tax-Free Childcare scheme before payments can be made. In some circumstances, Tax-Free Childcare can also be used to pay providers based in a European Economic Area (EEA) country after checking with HMRC. Families with disabled children can use the additional support to pay for extra childcare hours or specialist equipment provided through their childcare provider, such as mobility aids.
Eligibility criteria
Families may be eligible if they have a child aged 11 or under, with eligibility usually ending on September 1 following the child's 11th birthday. If a child is disabled, support can continue until September 1 after their 16th birthday. Each parent, if there is a partner, expects to earn at least the equivalent of 16 hours a week at the National Minimum Wage or National Living Wage, and earns no more than £100,000 a year. They must not receive Universal Credit or childcare vouchers. Parents can still qualify in some situations while on maternity leave, paternity leave, adoption leave, shared parental leave, statutory neonatal care pay, bereaved partner's paternity leave, annual leave or sick leave.
Some families may still be eligible if one parent is working while the other receives certain benefits, including Carer's Allowance, Incapacity Benefit, Severe Disablement Allowance, contribution-based Employment and Support Allowance or National Insurance credits. People starting or returning to work may also be eligible. Self-employed parents can also qualify, and anyone who started self-employment within the last 12 months may still be eligible regardless of how little they currently earn.
Income rules explained
To qualify, parents generally need to expect to earn over the next three months at least £2,643.68 before tax if aged 21 or over, £2,256.80 before tax if aged 18 to 20, or £1,664 before tax if under 18 or an apprentice. Parents with irregular incomes can use their average earnings over the current tax year when checking eligibility. Income from pensions, dividends, savings interest and property investments does not count towards the minimum earnings requirement.
Who cannot claim
Families cannot receive Tax-Free Childcare if they already claim Universal Credit childcare support, receive childcare vouchers through their employer, or if either parent expects adjusted net income above £100,000 during the tax year. The scheme is also unavailable if the child does not normally live with them, they are applying for a foster child, or they or their partner receive a childcare bursary or grant. HMRC says anyone claiming Universal Credit should wait until they receive a decision on their Tax-Free Childcare application before cancelling their existing claim. Parents using childcare vouchers must tell their employer within 90 days of applying to stop receiving childcare vouchers if they want to move to the Tax-Free Childcare scheme.
Alternative support
Families who cannot claim Tax-Free Childcare may still be able to receive other support, including Government-funded childcare for eligible three and four-year-olds, free education and childcare for some eligible two-year-olds, and Free Childcare for Working Parents for eligible foster carers in England. Parents who are unsure which form of childcare support would leave them better off can use the Government's childcare calculator to compare the different schemes.
