What is Tax-Free Childcare?
Eligible parents will open an online childcare account.
When a parent pays into the account, the government will pay in an extra 25%. So if £80 is paid into the account, the government will automatically add £20. The maximum government payments are £2,000 per child per year. This means annual childcare costs of £10,000 per child can be met by £8,000 of payments by the parents and £2,000 by the government.
For a disabled child, the maximum top-up payments are £4,000.
How much parents pay into their Tax-Free Childcare account, and when, is up to them.
Who Can Qualify for Tax-Free Childcare?
Parents need to be ‘working parents’ paying for ‘registered childcare’ for children under 12 (or under 17 for disabled children). If parents are not living together, the qualifying parent depends upon with whom the child usually lives.
The main criteria for a parent are:
• earns on average at least £120 a week
• earns less than £100,000 a year
• not receiving other support for childcare such as Child Tax Credit or Universal Credit.
The self-employed parent can average self-employment income across the year to meet the minimum income requirement.
If the parent has a partner, he/she also needs to be working and satisfy the criteria above.
It is possible for an individual who is not the parent to qualify if the child usually lives with them. The income criteria would apply to that individual (and their partner).
Partners are people who are:
• married or in a civil partnership, and live together in the same household, or
• a couple who live together as if they are married or in a civil partnership.