Many families choose to sign their child up to a nursery to ensure they get the very best start to their early education. Although parents seek the peace of mind that nursery provides them whilst they work, it may come with questions or concerns about costs and affordability.
Amazingly, there are approximately 1.3 million families in the UK who are eligible for the Tax Free Childcare scheme (which offers up to £2,000 a year, per child towards childcare costs). Currently, around 800,000 are not benefiting from the scheme.
Tax-Free Childcare is a Government scheme to support working parents with childcare costs. If eligible, you set up an online childcare account which you can use to pay your childcare provider directly. For every £8 you pay in, the Government will pay in an extra £2. You can get up to £2,000 per child per year, or £4,000 for children with disabilities.
Am I eligible?
The scheme is available to all parents who work (including the self-employed) and have children aged 0-11 years (or up to 17 years if disabled).
It is for parents who are not receiving Tax Credits, Universal Credit or childcare vouchers. However, eligible parents can use both Tax-Free Childcare and 30 hours funded together to support their childcare costs.
To qualify, parents must be in work and need to earn at least national minimum wage, but less than £100,000 a year. If you’re self-employed, you’ll qualify as long you earn at least £152 a week on average over the next three months.
How much do I get?
Every 80p you pay into your Tax-Free Childcare account, the Government will add an additional 20p. Eligible parents can get up to £2,000 per child per year.
As an example: If your childcare bill was £500 per month, you’d multiply 500 x 0.8 to get £400. Simply put, you would pay £400 into your Tax-Free Childcare account and the remaining £100 (20%) will then be topped up by the Government.
The Tax-Free Childcare calculator is extremely helpful to find out how much you could get towards approved childcare.
How does Tax-Free Childcare actually work?
You need to create an online childcare account via the Government Tax-Free Childcare site. Only one parent can open the account – though both can use it.
One of the key features of the Tax-Free Childcare scheme is that you need to reconfirm that you’re eligible at the end of each entitlement period, for your Tax-Free Childcare to continue into the next period. The entitlement period is usually three months, but HMRC can alter the length period by up to two months.
Parents can pay money into the account as and when they like, with flexibility to pay in more or less per month, and the ability to withdraw money from the account if you need to.
Do Little Hands Daycare accept the Tax-Free Childcare scheme?
At Little Hands, we accept payments via the Tax-Free Childcare scheme. We ask all parents who use the scheme to allow an additional 3-5 working days to process these payments to ensure fees are paid by the 5th of each month.
You will be provided with a Tax Free Childcare reference when you register, please use this reference when sending in your payments and upload it to your Nursery in a Box account. You can find further details of how to apply for Tax Free Childcare at www.childcarechoices.gov.uk.