What is the Tax-free Childcare Account?
For working parents and carers with children under 12, the Government provides support with funding towards ‘approved childcare provider’ costs for:
- nurseries, childminders and nannies
- before and after school clubs
- play schemes
- summer camps
You can set up a Childcare Account with HMRC and make payments for childcare costs, to which the government adds 25% to the amounts that you save. For every £8 you pay into this account, the government will pay in £2 to use to pay your provider.
You can get up to £500 every 3 months (up to £2,000 a year) for each of your children, to help with the costs of childcare. This goes up to £1,000 every 3 months if a child is disabled (up to £4,000 a year).
It doesn’t need to be the child’s parents paying into the account - uncles, aunts, grandparents and others can also make payments.
Approved Childcare providers
The money in the Childcare Account is then used to pay approved Ofsted registered childcare providers including:
- registered childminder, nanny, playscheme, nursery or club
- childminder or nanny with a registered childminder agency or childcare agency
- registered school
- home care worker working for a registered home care agency
Check if you qualify
Working parents and carers can are eligible if you or your partner have adjusted net less than £100,000 for the current tax year. Your eligibility also depends on:
- if you are working
- your child’s age and circumstances
- your immigration status
If your working pattern has changed because of coronavirus (COVID-19), you may still be eligible for Tax-Free Childcare if you’re temporarily working less and either:
- you’re on furlough through the Coronavirus Job Retention Scheme
- you’re claiming a Self Employment Income Support Scheme grantYou can also get Tax-Free Childcare at the same time as 30 hours free childcare if you’re eligible for both. Find out more on your eligibility on Gov.uk here: https://www.gov.uk/tax-free-childcare
What about Childcare Vouchers?
This new scheme will gradually replace childcare vouchers which many employers continue to provide to employees. These are free from tax and national insurance (there are limits) and can be used to pay for childcare until the child is 16. Childcare voucher schemes can no longer be set up but employees already eligible can continue to benefit.
If you’re starting to plan your child care arrangements for the new term or need advice on any personal tax matters, contact a member of our helpful team in Manchester on 0161 905 1801 or in Warrington on 01925 830 830 – we’re here to help.