I’m a parent, how do I claim tax-free childcare?

by | Championing Working Parents, For Parents, Parent Community, Parent Guides, Parenting

As a parent, you’re probably acutely aware of the astronomical cost of childcare in this country. In fact, UK parents are besieged by some of the highest childcare costs in the world, with prices skyrocketing to unaffordable levels for many families. Shockingly, parents are spending almost a quarter of their household income on childcare, and with the cost of living crisis looming above all of our heads, many of us are seriously concerned about the ominous state of our financial prognosis.

What many parents don’t realise is that there are measures currently in place to help support their childcare expenses. Most notably, over one million parents are currently eligible to receive tax-free childcare support from the government. So if you’re interested in learning more about how you can save on your childcare costs, read on for our guide to tax-free childcare.

What is Tax Free Childcare?

Tax-free childcare is a government support scheme that aims to help working parents cope with childcare costs. Introduced in 2017, the scheme is open to over one million eligible parents and it doesn’t rely on your employer providing access.

Under the scheme, parents can claim up to £2,000 per child per year towards childcare costs. This works by the government matching parental contributions by 20% – the equivalent of the tax that most people will pay on this type of service. 

Who is eligible for tax free childcare?

Tax-free childcare is not open for all, and parents must meet certain eligibility criteria in order to claim: 

  • You and your partner must be at least 16 years old and expect to earn at least £152 per week on average. 
  • You or your partner must not individually expect to earn over £100,000.
  • You must not be receiving Tax Credits, Universal Credit, or childcare vouchers.
  • Your child/ children must be aged 0-11 (or 0-16 if they have a disability).
  • You can still claim even if you are self-employed.
  • You may still be eligible even if you or your partner are currently on maternity, paternity and adoption leave, are unable to work due to disability, or have caring responsibilities. There is also a ‘start-up’ period to support newly self-employed parents. 

How does tax-free childcare work?

Tax-free childcare works similarly to Help to Buy schemes in that the government will contribute based on an amount you pay into an online account. 

For every £8 that you pay in, the government will top this up by an extra £2, up to the value of £2,000 per child on an annual basis. If you have a disabled child, this is slightly higher at £4,000 per child.

You can vary how much you pay in any given month, and are able to accrue a balance for when you may need it more (for example, in the school holidays or during busier periods at work). If your circumstances change, you are able to withdraw your contributions. 

Who can pay into my tax-free childcare account?

The scheme accommodates for those other than parents to pay into the accounts. Grandparents, family members and employers are also able to pay into to contribute to childcare costs.

Where can I spend my childcare balance?

At present, you can use your balance to pay for:

  • Registered childminders, nurseries and nannies.
  • Registered after-school clubs.
  • Registered schools.
  • Registered home-care agencies.

Can I claim tax-free childcare through Bubble? 

Unfortunately, we are mostly unable to accept payments through this scheme at this moment in time. 

This is due to the fact that we operate in a different way to many other childcare providers, by functioning as a marketplace that allows parents to connect with self-employed babysitters and nannies. Bubble represents a more innovative way to approach the childcare crisis and we hope to be able to offer access to tax free childcare in the future.

That said, it may be possible to use this scheme when hiring a permanent nanny, provided that they are Ofsted registered and that you meet the other eligibility criteria as outlined above. If you are unsure, you can speak with one of Nanny Consultants when you make an enquiry.

How do I register for tax-free childcare?

You can apply for tax-free childcare via the government website.

Is there anything else I should know?

If you’re looking for some more support around this issue, or would like further information you can read this guide or visit childcarechoices.co.uk.

You can also find out more about what support you’re entitled to by visiting the government’s childcare calculator.