Tax-Free Childcare: Are you making the most of the available support?

Childcare can be a significant expense for working families, particularly during the school holidays. HMRC is reminding parents that the Tax-Free Childcare scheme could help reduce those costs.

The scheme can be used towards a range of approved childcare, including nurseries, childminders, breakfast and after-school clubs, and holiday clubs.

For employers, it's also worth being aware of the support available. Signposting employees towards schemes such as Tax-Free Childcare can be a simple way to support working parents and employee wellbeing.

How much could you save?

Through Tax-Free Childcare, the government adds £2 for every £8 you pay into your childcare account.

This means eligible families can receive up to £2,000 per child, per year towards childcare costs. For a disabled child, this increases to £4,000 per year.

The support is paid as a top-up of up to £500 every three months for each eligible child, or £1,000 for a disabled child.

Parents can open an account for each eligible child and use the money to pay registered childcare providers.

Approved childcare can include:

• Nurseries

• Registered childminders

• Holiday clubs

• Breakfast clubs

• After-school clubs
  

Tax-Free Childcare isn't just for families with very young children either. HMRC has reported an increase in the number of families using the scheme for children aged eight and over, highlighting its potential value for wraparound and school holiday care.

Who is eligible for Tax-Free Childcare?

Eligibility depends on your circumstances, but generally you may qualify if:

• Your child is aged 11 or under, or under 17 if they have a disability

• You and your partner, if you have one, each expect to earn at least the equivalent of 16 hours a week at the applicable National Minimum Wage or National Living Wage

• Neither you nor your partner has an expected adjusted net income of more than £100,000 a year

• You aren't receiving Universal Credit or using childcare vouchers at the same time
  

Different rules can apply depending on your circumstances, so it's important to check your individual eligibility.

Using your childcare account

Once your Tax-Free Childcare account is open, you can pay money into it and use the government top-up towards eligible childcare.

You don't have to spend the money immediately, which means you can build up funds ahead of periods when childcare costs are likely to be higher, such as the school holidays.

Tax-Free Childcare can also be used alongside eligible government-funded childcare hours, potentially helping families reduce their overall childcare costs further.

Don't miss out on available support

With childcare costs putting pressure on many household budgets, it's worth checking whether you could benefit from Tax-Free Childcare – particularly if you haven't reviewed your eligibility recently.

Employers may also want to remind their teams about the scheme and other childcare support available to working parents.

You can find out more, check your eligibility and apply through the government's Tax-Free Childcare service.

If you have questions about how changes to your income or circumstances could affect your tax position, speak to the team at SJC, Chartered Accountants. We're here to help.