The Government's Tax-Free Childcare scheme, operational since April 2017, is designed to help working families with their regular costs. Eligible parents can open an online account to pay for registered childcare. For every £8 you pay in, the Government will add an extra £2, up to a maximum of £2,000 per child per year of £4,000 for a disabled child.

Do you qualify?

You're entitled to participate if:

  • you earn an average at least £120 a week, but less than £100,000 per year
  • you are not receiving other support for childcare (eg Child Tax Credit, Universal Credit or Company Childcare Vouchers).
  • If you or your partner are on maternity, paternity or adoption leave - or are unable to work because you are disabled or have caring responsibilities - you may still be eligible. The Tax-Free Childcare scheme can be used in conjunction with the free 15 and 30 hour schemes.

Payments are made from your online childcare account to registered childcare providers and will include both your payment and the Government contribution. You're able to check online for registered and approved childcare providers.

Where are the other options?

Tax-free Childcare isn't the only scheme aimed at supporting parents with these costs. Many workplaces also offer childcare vouchers, which are paid via salary sacrifice. You may find that one scheme is more suitable for your circumstances than the other. The Tax-Free Childcare information hub offers a comparison chart of the two schemes, along with a handy calculator to help you work out which is best for you. It's worth noting that from April 2018, parents will no longer be able to join the current childcare voucher scheme, but it will continue to run for those who join before the cut-off.

For further information on this subject please contact our Employment Tax Specialist, Dawn Foden-Smith who will be able to offer advice about childcare vouchers.