Could you claim tax-free childcare this summer?

5th July 2019

The school holidays are fast approaching, and many parents will be faced with the familiar juggling act of managing work while keeping children occupied. While there are many activities and childcare options available, they come at a cost. However, many working parents could save money by making use of a relatively new tax-saving scheme.

HMRC recently closed its childcare vouchers scheme to new parents, replacing it with ‘tax-free childcare’. If eligible, the government will pay £2 for every £8 you pay your childcare provider. This is paid via an online childcare account that you set up for your child. Take up of the new scheme is lower than expected so it’s worth checking whether you are eligible.

The eligibility criteria are broad and reasonably accessible for those who are self-employed as well as those in full and part time employment. The main criteria are as follows:

  • You must be in work, on sick leave or annual leave, or on parental, maternity, paternity or adoption leave
  • You and your partner (where applicable) should be expecting to earn at least the National Minimum Wage or Living Wage for 16 hours a week on average. For example, over the next 3 months you each expect to earn at least £1,707.68 - the National Living Wage for people over 25.
  • If you are self-employed and do not expect to make enough profit in the next 3 months, you can use an average of how much you expect to make over the current tax year. The earnings limit doesn’t apply if you started your business less than 12 months ago.
  • You or your partner will not have an adjusted net income* of over £100,000 in the current tax year, including expected bonuses (*adjusted net income is your total taxable income before any personal allowances and minus things like Gift Aid.)
  • Your child or children are aged 11 or under and live with you.

Other eligibility criteria apply – see the HMRC website for details.

Before you rush to claim, please be aware that you cannot get Tax-Free Childcare at the same time as claiming Working Tax Credit, Child Tax Credit, Universal Credit or childcare vouchers.

Which scheme you’re better off with depends on your situation. HMRC offers a childcare calculator to help you work out which type of support is best for you. Alternatively, contact a member of our team for advice or read more about the services that our tax team offers.