Families urged to boost budget with account that pays up to £2,000 tax-free
Households can get up to £500 every three months for each child, or £1,000 if their child has a disability, to help with the costs of childcare.
As the new school term approaches, HM Revenue and Customs (HMRC) is reminding families to open a Tax-Free Childcare account to save up to £2,000 per child on their yearly childcare bills.
Families can use the account to pay for any approved childcare including holiday clubs, breakfast and after-school clubs, childminders and nurseries.
Myrtle Lloyd, HMRC’s director general for customer services, said: “Starting back to school and arranging childcare for the term ahead can be costly for working families.
“Tax-Free Childcare offers financial help so families can save on the cost of childcare. Search Tax-Free Childcare on GOV.UK and sign up online today.”
The scheme provides working families, with children up to the age of 11, or 16 if their child has a disability, up to £2,000 a year per child or £4,000 a year if their child is disabled.
For every £8 paid into a Tax-Free Childcare account, families automatically receive the Government top-up of £2. Up to £500 can be saved every three months for each child or £1,000 if their child is disabled.
Parents and carers could be eligible for Tax-Free Childcare if they:
- Have a child or children aged up to 11. They stop being eligible on September 1 after their 11th birthday. If their child is disabled, they may get up to £4,000 a year until September 1 after their 16th birthday
- Earn, or expect to earn, at least the National Minimum Wage or Living Wage for 16 hours a week, on average
- Each earns no more than £100,000 per annum
- Do not receive Tax Credits, Universal Credit or childcare vouchers.
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It should be noted that the person’s childcare provider must be signed up to the scheme before they can pay them and benefit from Tax-Free Childcare. So, people should check with the provider to see if they’re signed up first.
Opening a Tax-Free Childcare account online is straightforward and can be done in about 20 minutes. Money can be deposited at any time, 365 days a year, to be used straight away or left in the account and used whenever it is needed. Unused money in the account can be withdrawn at any time.
Each eligible child will require their own Tax-Free Childcare account and if families have more than one eligible child, they will need to register an account for each. The Government top-up is then applied to deposits made for each child.
Earlier this year, the Government also announced new plans to expand the offer of 30 hours of free childcare a week, so that working parents can access support for children over the age of nine months up to when they start school.
Families can get Tax-Free Childcare at the same time as 30 hours of free childcare if they’re eligible for both.
For additional cost of living support, people can check GOV.UK to find out what they could be eligible for, including help with childcare costs.
