HM Revenue & Customs (HMRC) has reminded parents that they may be eligible for Tax-Free Childcare ahead of the new academic year.
The tax authority said thousands of families may be missing out on thousands of pounds in tax relief every year.
If you are a working parent, here’s what you need to know.
What is Tax-Free Childcare?
Launched in April 2017, the initiative is designed to support working parents to pay for essential childcare services, such as childminding and after school clubs.
How does Tax-Free Childcare work?
For every £8 you pay into your childcare account, the Government will pay in £2 to use to pay your childcare provider.
You can get up to £500 every three 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 three months if a child is disabled (up to £4,000 a year).
How do I open a childcare account?
You can use this link to apply for a childcare account.
What can Tax-Free Childcare be used to pay for?
The cash can be used to pay for approved childcare, such as childminders, nurseries and nannies, as well as after school clubs and play schemes.
Your childcare provider must be signed up to the scheme before you can pay them and benefit from Tax-Free Childcare.
Am I eligible for Tax-Free Childcare?
To claim relief, you – and your partner if you have one – need to expect to earn at least the National Minimum Wage or Living Wage for 16 hours a week on average over the next three months.
If you or your partner have an expected ‘adjusted net income’ over £100,000 in the current tax year you will not be eligible. This includes any bonuses you expect to get.
The full eligibility criteria can be found here.
Can I claim Tax-Free Childcare and 30 hours of free childcare?
Yes, you can claim both schemes at the same time if you are eligible for both.
Get advice today
For help and advice with related matters, please get in touch with our team today.