A Government scheme could help parents save up to £2,000 on their childcare costs through tax reliefs aimed at working parents.
The reliefs come in the form of a Tax-free Childcare account, from which you directly pay for your childcare needs.
With a Tax-free Childcare account, for every £8 you pay in, the Government will give you £2, up to a maximum of £2,000 per year per child. This is doubled if the child has disabilities – up to £4,000 per child, per year.
This is applicable to multiple children, so each child is entitled to £2,000 of tax-free childcare by using separate accounts.
Who can use a Tax-free Childcare account?
There are certain qualifying factors on who can use a Tax-free Childcare account.
- Both parents must be working, including self-employed, unless there is legitimate reason, e.g., disability or caring responsibilities.
- Between you, you must be earning under £100k and above an average of £167 per week.
- You must not be receiving Tax Credits, Universal Credit, or childcare vouchers.
- The children must be aged 0-11 (or 0-16 if disabled).
- Parents of adopted (not fostered) children may also use the account if they meet the other criteria.
How to apply
If you have more than one child in childcare you will need to open an account for each child, however you can do this as part of a single application.
You will need your National Insurance number and the process usually takes around 20 minutes but you might find it easier with one of our expert accountants to help you through the application.
Once you have applied for your Tax-free Childcare account, you can:
- View all your children’s Tax-Free Childcare accounts in one place.
- Confirm that you remain eligible for Tax-Free Childcare in the future.
- Make payments into a child’s Tax-Free Childcare account.
- Use the accounts to pay for childcare expenses.
Family, friends, and employers can also pay into the account should you wish.
If you are a single parent, you can apply for Tax-Free Childcare provided you meet the eligibility requirements.
The scheme can be complicated to understand and applying can be difficult for individuals, especially when they are balancing childcare needs.
Engaging the services of a qualified accountant can speed up the process and increase your chances of making the most of Tax-free Childcare accounts.
Our expert team of accountants is here to help streamline your finances and better prepare you for future expenses. Please, get in touch.