Tax-Free Childcare
Contents
Tax-Free Childcare
How does Tax-Free Childcare work?
Eligibility for Tax-Free Childcare
Universal Credit and Tax-Free Childcare
Childcare calculator
Tax-Free Childcare
Tax-Free Childcare offers working families support towards qualifying childcare
costs. The scheme is delivered by HM Revenue and Customs (HMRC)
It replaces the Employer Supported Childcare Scheme, also known as the
Childcare Voucher Scheme.
It is available to parents who are:
• full-time employees
• self-employed including those starting their own business
• working part time
• on paid and unpaid maternity, paternity or adoption leave
• on paid sick leave
• unable to work due to disability or caring responsibilities
The scheme is available in England, Wales, Scotland and Northern Ireland.
How does Tax-Free Childcare work?
Parents can open an online account through GOV.UK.
They use the account to pay for childcare costs whilst working.
The government will top-up the account to a maximum amount (for details of the
amounts see
GOV.UK).
The childcare must be obtained from a registered or approved childcare provider.
The online childcare account is provided by National Savings & Investments
(NS&I) in partnership with HMRC.
Other people can pay into the account (for example, grandparents, other family
members or employers).
Eligibility for Tax-Free Childcare
For the parent or their partner (if they have one) to be eligible for a Tax-Free
Childcare account, all of the following must apply. They:
• must be over 16 years old
• live and work in the UK (special rules apply if they live or work in another
country)
• do not receive Tax Credits, Universal Credit or childcare vouchers (Child
Benefit, Child Maintenance payments and free childcare for 2-4 year olds
are unaffected)
• are working either employed or self-employed (If they are part of a couple,
both must be working, or if one partner is working and the other partner is
in receipt of Incapacity Benefit, Severe Disablement Allowance, Carer’s
Allowance or Employment and Support Allowance and they are due to
restart work within the next 31 days)
• earn at least the National Minimum Wage or National Living Wage for 16
hours a week on average
• do not expect to earn £100,000 or more each in the current tax year
• are responsible for a child under 12 or under 17 (if in receipt of Disability
Living Allowance or Child Disability Payment (CDP) in Scotland or
Personal Independence Payment (PIP), Adult Disability Payment (ADP) or
certified as severely sight impaired or blind by a consultant
ophthalmologist)
Further information can be found on:
•
http://www.gov.uk/tax-free-childcare
•
https://www.childcarechoices.gov.uk/.
Universal Credit and Tax-Free Childcare
Claimants won’t be eligible to open a Tax-Free Childcare account if they are
receiving or have any outstanding claim to receive, any element of Universal
Credit.
Claimants can move between tax-free childcare and Universal Credit as their
circumstances change, provided they meet the eligibility conditions.
If there are no changes of circumstances, a claimant will be limited to the number
of times they can switch between the schemes.
After claiming Universal Credit, claimants with a Tax-Free Childcare account:
• must not reconfirm eligibility for Tax-Free Childcare when they receive the
Her Majesty’s Revenue and Customs (HMRC) reminder
• will have their Tax-Free Childcare account become ‘pay only’
• must withdraw or use any remaining money in their Tax-Free Childcare
account within two years of claiming Universal Credit
If a claimant needs help using the Tax-Free Childcare account, they can call the
HMRC childcare service helpline on 0300 123 4097.
They can also claim for childcare costs through Universal Credit.
Claimants should not end their Universal Credit until they know which offers are
available and how much they could get. This is to make sure that they will not be
worse off going on to Tax-Free Childcare from Universal Credit.
In a limited number of cases, some claimants moving to Universal Credit from
Tax-Free Childcare will temporarily receive 105% of their childcare costs in
support from the two schemes, 85% from Universal Credit and 20% from Tax-
Free Childcare.
Parents in receipt of Universal Credit will be able to use any money in their online
tax-free childcare account for up to two years after they cease to qualify for the
top-up payments.
Childcare calculator
Parents need to consider which is the best route for them and must be
signposted to the childcare calculator on
GOV.UK The calculator can be used to
see what help is available with childcare costs.
