Having children is one of the best and most rewarding experiences for many couples and single parents. However, raising a family isn’t always cheap and according to the Child Poverty Action Group in 2020 the average cost of raising a child from birth to the age of 18 cost £71,611 for couples and £97,862 for single-parent families.
One way the government used to support childcare costs was through the childcare voucher scheme, which to new applicants on 4 October 2018. This is where parents would sacrifice up to £248 of their salary to purchase childcare vouchers that would be used as payment for many forms of registered childcare, such as breakfast and afterschool clubs, holiday schemes, childminders and day nurseries. The amount would be exempt from tax and National Insurance contributions, resulting in savings of up to £933 per year, per parent (£1,866 per household). However, many employers didn’t support the scheme, which made lots of working parents ineligible for childcare vouchers.
Luckily, tax-free childcare is another government scheme that supports parents with the financial cost of childcare for toddlers and young teens.
Here, we answer your most pressing questions around tax-free childcare, including what it is, if you’re eligible and how you can apply for it.
What is tax-free childcare?
Tax-free childcare is a government scheme which allows parents to claim up to £500 every three months (or £1,000 if your child is disabled) for each of your children to help with the costs of childcare. It is available for children aged 11 or under, or 16 and under if they’re disabled.
The money can be used for approved childcare such as nannies, nurseries, childminders, after school clubs and pay schemes. ‘Approved childcare’ is when the childcare is registered and has a recognised status for the care they are providing.
How does tax-free childcare work?
Depending on your work, income, child’s age and immigration status determines whether you’re eligible for tax-free childcare. We list the criteria below:
Work: you must each be earning under £100k and at least £142 per week (this is equal to 16 hours at the National Minimum or Living wage). Tax-free childcare also extends to those who are self-employed too.
Child’s age: your child must be aged 0 to 11 and usually live with you (or 0 to 16 if disabled). Adopted children are eligible for tax-free childcare, but foster children are not.
Immigration status: you must have a National Insurance number and either one of the following - a British or Irish citizenship, settled or pre-settled status, permission to access UK funds.
*You can’t be receiving Tax Credits, Universal Credit or childcare vouchers.
Is tax-free childcare the same as 30 hours?
Tax-free childcare is not the same as 30 hours free childcare, this is a different type of benefit offered to parents, which you can still get at the same time as tax-free childcare, if you’re eligible for both.
How can I apply for tax-free childcare?
15 hours free childcare for tots
This is another way the government supports parents with childcare in England only. Parents can either claim 15 hours of free childcare or early education for 38 weeks.
Again, there is a criteria list you have to meet to be able to receive this and this and is available for 2 year olds, as well as 3 and 4 year olds. More information on whether you’re eligible can be found here.