What is the Tax-Free Childcare account?
This is an online account that can be opened by parents that enables you to save for childcare costs. For every £8 you pay into the account, the government will add £2, up to a maximum of £2,000 per child, per year.
The account can be used to pay for childcare for children up to 12 years old, to providers who are registered for the scheme.
For disabled children, up to £4,000 per year is available for children up to 17 years old.
You can withdraw funds that you’ve paid into the account but the government will also withdraw their contribution if you do.
Am I eligible for a Tax-Free Childcare account?
Unlike the childcare voucher scheme which is only available to employees, this account can be accessed by the self-employed as well.
There are a number of conditions to meet, as follows:
- You must earn at least £125 on average per week (£6,500 per year) which is the equivalent of 16 hours at the living wage for 25 year-olds.
- You must earn less than £100,000 per year
- You must not be in receipt of childcare vouchers
- You must not be in receipt of tax credits or universal credit
- If you have a partner, they must also meet the eligibility criteria
- If you or your partner don’t work you may still be eligible if you receive certain benefits such as carers allowance, employment and support allowance or incapacity benefit
Is this right for me?
If you are in receipt of Working Tax Credits, Child Tax Credits or Universal Credit then these will stop immediately if you successfully apply for this account.
Similarly, if you are in receipt of childcare vouchers these will be withdrawn.
HMRC have a childcare calculator which can help you to work out whether you will be better off with this account or as you are now.
What should I do next?
If you are concerned about childcare costs, you should visit the government website www.childcarechoices.gov.uk. There is lots of information here about the childcare account as well as other schemes such as the 15 or 30 hours free childcare for pre-school children.
To apply for a childcare account visit www.gov.uk/get-tax-free-childcare. This will walk you through step by step, looking at whether you are eligible, whether you will be better off and link you to the online application. You will need some ID to open the account, such as a P60, bank statement, passport or driving licence.
