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Financial support for childcare
 

We know childcare can be expensive for working parents. That’s why PC Payroll & Legal is always on hand to provide information to those looking to make the most of their childcare options.

There are two existing forms of childcare support, however only Tax-Free Childcare is available to new parents as the childcare voucher scheme stopped taking on new families in 2018.

Register or get in touch to discuss your needs

Tax free childcare

We know childcare can be expensive for working parents. That’s why PC Payroll & Legal is always on hand to provide information to those looking to make the most of their childcare options.

There are two existing forms of childcare support, however only Tax-Free Childcare is available to new parents as the childcare voucher scheme stopped taking on new families in 2018.

What is Tax-Free Childcare?

Tax-Free Childcare is a government supported scheme to help working parents pay for regulated childcare. The government makes contributions into an agreed fund alongside of parents.

How is it Tax-Free if I pay for it out of my take home salary??

For every £8 a parent pays into their childcare fund, the government will contribute £2. This is essentially a 20% contribution, which is the equivalent of the lowest level of income tax.

How much money can I put into this scheme?

You can put in as much money as you like, however there is a limit as to what the government will contribute. The maximum contribution by the government is £500 every 3 months or £2,000 every year, per child.

Can I put the money in any bank account?

No.  You will need to create an account with the government by visiting www.gov.uk/childcareaccount.  You will need your Government Gateway User ID and password, which you would have used to apply for the Tax Free Childcare and for 30 hours free childcare available to young children age 3-5 years.

Can anyone pay into my account?

Yes.  If grandparents, friends or employers wish to pay into the account they can, but the government contribution is limited to £500 per quarter.

Who manages the account?

You are responsible for managing the account and will need to ensure that the money you deposit reaches your account and is also set up correctly to pay your childcare provider.

How do I manage it?

This is an online service. You will have to provide income information every 3 months to remain eligible for continued government support.  It is important that you acknowledge all your income for this period, but be aware that any fluctuations in your income, for example company bonuses or over-time, may affect your contributions.

Can anyone apply for Tax-Free Childcare?

There are eligibility criteria for applying for Tax-Free Childcare.

These include:

  • You (and your partner if you have one) must be working for more than 16 hours per week and earn an income of at least £1,813.76 over 3 months. This is the National Living Wage for people over 25.
  • Your child is under the age of 12 (or 17 if registered disabled)
  • You (and your partner if you have one) earn less than £100,000 each per year.
  • Have the right to live and work in the UK.

Is the scheme available for self-employed individuals?

Yes.  As long as you fulfil the criteria above, then you are eligible to apply.  

How does this support my family?

Tax-Free Childcare supports your family because you can have an account for each child you have.  Whereas previous childcare support (see childcare vouchers below) provided a fixed sum per household, this scheme provides you with support per child. Therefore if you have more than one child to care for, you can invest more and the government will contribute to each child.

Is this a popular form of childcare support?

It is the only available support that new parents can sign up to, but the uptake has not been as expected.  It is estimated that 130 million eligible families are missing out on this form of support from the government.

Who can I pay with these funds?

You can pay any Ofsted registered and regulated form of childcare with these funds, which includes nurseries, childminders, before and after school care groups as well as Ofsted registered nannies.

Will all providers accept payments through Tax-Free Childcare?

All registered  and approved providers should be able to accept payment from your Tax-Free Childcare account. If a provider is not registered then they can apply to be approved, however this can take up to 12 weeks and there will therefore be a delay in your ability to use this fund source to make payment for a short period.

When can I sign up for a Tax-Free Childcare account?

You can only open a Tax-Free Childcare account 31 days before you return to work after your baby has been born.  If you already have older children and are returning to work, you can apply immediately.  You can not apply f on maternity leave or expecting to go on leave from your current role until after your baby is born and you are set to return to your job.

Who benefits most from this scheme?

This form of childcare support is best suited to families with multiple children on mid-to-low incomes. 

Childcare vouchers

Unfortunately the Childcare Voucher scheme, which was a salary sacrifice scheme, ended in October 2018.

If you were registered to a scheme, with your current employer before this date you can still take advantage of this benefit.  If not you will need to use the tax free childcare option above.

Read here for more information on childcare vouchers. [link to new childcare voucher page]

Contact us to discuss childcare vouchers further

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