TIME TO ACT
The 20-minute Christmas check every parent should do NOW – or miss out on £2,000
Find out if you could be eligible
PARENTS must check their tax-free childcare registration this Christmas, or they could miss out on £2,000.
An estimated 800,000 families who should get the benefit miss out each year because they don’t sign up, according to Money Saving Expert’s Martin Lewis.
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The scheme pays £2 towards approved childcare for every £8 a family saves, up to a limit of £2,000 a year.
It’s available to help with the cost of childcare for children under 11, or up to 16 if the child has disability.
Every three months, parents who are eligible get £500 free from the government. If your child is disabled, you could get up to £1,000.
The money can be used for all sorts of things including nurseries, childminders, wraparound care and even after school and holiday clubs.
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Even better, it only takes around 15 minutes to set up an account.
The money can be used alongside the government’s free 15- and 30-hours schemes, significantly reducing the cost of childcare for very young children.
How tax-free childcare works
If you’re eligible, you set up an account online and start saving into it. For every £8 you put into the account, the government will automatically add £2, up to annual cap of £2,000 (or £4,000 if your child is disabled).
But not every spends that much on childcare, so you should do your sums carefully to work out how much you need to save.
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The money can only be used for approved childcare, so you should only lock away as much as you need.
The types of things that are approved include nurseries, nannies, and childminders, but also breakfast clubs, after-school clubs, and holiday clubs.
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The childcare provider or club needs to be signed up to the scheme before you can use the saved money, so make sure you’ve checked before you start saving.
If your child is disabled, you can also use some of the cash so that your childcare provider can get specialist equipment such as mobility aids.
Speak to the organisers to see what they already have an what might be appropriate.
Who is eligible for tax-free childcare?
Eligibility is based on several factors including your work status, income, child’s age and circumstances, and your immigration status.
Usually, you and your partner (if you have one and live with them) need to be working to get tax-free childcare, but you can still get the money if you’re on sick leave, annual leave or some form of parental leave.
You’ll be expected to earn a certain amount over the next three months in order to qualify. How much, depends on how old you are.
The requirements are:
- £2,379 if you’re aged 21 or over
- £1,788 if you’re aged 18 to 20
- £1,331 if you’re under 18 or an apprentice
This works out as the National Living or Minimum Wage for someone working 16 hours a week.
If your income fluctuates or you’re self-employed, you can use an average of what you expect to earn across the whole year.
If you started a business less that 12 months ago, there is more flexibility, which means you can earn less and still be eligible.
If you’re not working, you might still be able to apply if you get one of the following benefits:
- Incapacity Benefit
- Severe Disablement Allowance
- Carer’s Allowance or (in Scotland only) Carer Support Payment
- contribution-based Employment and Support Allowance
Higher earners do not benefit from the scheme. If either you or your partner earns more than £100,000 after tax and pension contributions, you will be disqualified and won’t get the cash.
If your salary is only just over the limit, it usually makes sense to increase your pensions contributions, to avoid a benefits and tax cliff-edge.
Your child needs to live with you if you want to claim tax-free childcare, and the money normally stops on September 1 after their 11th birthday.
Families with children with disabilities can get higher amounts for longer, but your child will need to either:
- get Disability Living Allowance, Personal Independence Payment, Armed Forces Independence Payment, Child Disability Payment (Scotland only) or Adult Disability Payment (Scotland only)
- be certified as blind or severely sight-impaired.
You’ll need to have a National Insurance number, and if you don’t have British or Irish citizenship, you will also need to meet
You cannot get Tax-Free Childcare at the same time as Working Tax Credit, Child Tax Credit, Universal Credit or childcare vouchers.
The government has a , which tells you the scheme that is best suited to your needs.
How to apply
You can apply for tax-free childcare online, and it’s a relatively quick and straightforward process.
First, go to the and fill in the required information. You’ll need to include information about your partner if you live with them.
If you separate, you need to decide who is responsible for your child, only one person will get the tax-free childcare.
You must reconfirm your eligibility for Tax-Free Childcare every three months. You can do this up to 28 days before your eligibility code ends.
You'll receive email reminders four and two weeks before the reconfirmation deadline, and a notification on the deadline date.
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Meanwhile, parents who get benefits should see payments rise by 1.7% from next April, helping them to manage the increasing cost of living.
Chancellor Rachel Reeves, confirmed in the Budget that all working age benefits would be going up in line with the Consumer Prices Index (CPI) inflation rate.
Child benefit
Everything to know about child benefit:
How much is child benefit and when does it stop?
How long does child benefit take to claim and is it means-tested?
What age do child benefits stop and can I claim for a third child?
Are child benefit payments going up and how much more will I get?
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