Are you missing out on Tax-free childcare. With the school summer holidays round the corner, the cost of childcare has become a hot topic in many homes. But help is at hand – as long as you know where to look.
Stockport based accountants Bennett Verby, explain how the scheme works and who is eligible for tax-free childcare.
“It is estimated that over a million eligible families are missing out on the tax-free childcare scheme, which can offer £2,000 per year, per child, which can be put towards play schemes and after school clubs, as well as nurseries and childminders.
Under the scheme, a parent or guardian opens a tax-free childcare account and decides how much to pay in. They can receive government top-ups of £2 for every £8 that they pay in, up to a maximum of £2,000 per child (or £4,000 for disabled children). This is paid in quarterly instalments. There is an overall maximum limit of £10,000. The scheme is open to all working parents across the UK with children under 12 on the 1st September following their 11th birthday, or under 17 if disabled. You will not be eligible, and neither will your partner, if you are from outside the EEA and your residence card says you are not eligible to public funds.
Circumstances are re-confirmed online every three months. The account must be in the name of just one person, so you will need to decide who should open it. Anyone can pay into the account though, including grandparents, other family members or employers, giving flexibility to pay in more in some months, and less at other times. If your circumstances change, money can be withdrawn at any time but the government contribution will be lost.
To qualify for the government contribution, you and your partner or spouse will usually have to be in work, expecting to earn at least the National Minimum Wage (NMW) or Living Wage (LW) for 16 hours a week on average, over the next 3 months. You will not be eligible if your “adjusted income” is above £100,000.00 per annum. This also applies to your partner. You can get tax-free childcare at the same time as 30 hours free childcare, if you are eligible for both.
Self-employed people who do not expect to make enough profit in the next 3 months can use an average of how much they expect to make over the current tax year. Additionally, the earnings limit does not apply to self-employed individuals who started their business less than 12 months ago.
You pay for childcare directly from the account, so your provider must be registered with the tax-free childcare scheme as well as with Ofsted or another regulator such as The Early Years Register or The Childcare Register.
If you currently use childcare vouchers, you may be better off on this scheme. You can’t swap back to vouchers once you stop them though, so take a look at the calculators on the government’s Childcare Choices website, to compare all the government’s childcare offers and check what works best for your family, including the 30-hour free childcare offer (which can be used at the same time), vouchers, tax-free childcare or universal credit.”