Tax Free Childcare - What It Is & How to Get It
What is Tax Free Childcare?
Tax Free Childcare is a Government run scheme set up to help working parents meet their childcare costs.
It will eventually replace the Childcare Voucher scheme currently in place, which will continue for those parents already using this system, however the voucher system will be closed to new applicants from April 2018.
In simple terms, Tax Free Childcare is an online account within which, for every £8 you put in, the Government will put in £2. For example, you have a nursery bill of £1,000 per month, you transfer £800 into your Tax Free Childcare account, the Government then top it up to £1,000 which you then transfer onto your provider, saving you £200 per month!
You can pay your nursery bill, childminders costs, after school club fees and holiday club providers as long as they are registered to receive payments this way. A quick phone call to them will clear this up for you.
Am I Able to Apply?
The main eligibility criteria is that parents within the household (or parent if you are a single mumma/dadda!) must be earning a minimum of £120 per week, which is essentially 16 hours at the minimum wage, but no more than £100,000 per year each.
It is likely you will still be eligible if you are currently on maternity leave, paternity leave, adoption leave are disabled or are a carer.
Bear in Mind...
You won't be able to open a Tax Free Childcare account if you are in receipt of Universal or Working Tax Credits. If this applies to you, take a minute to go through HMRC's Better Off Calculator which will help you work out if Childcare Vouchers are a more viable option.
If you are already using the Childcare Voucher scheme, you won't be able to open a Tax Free Childcare account as well. However, depending on your monthly childcare bills, it may actually be more beneficial for you to stick with the vouchers anyway. Have a look at the Childcare Savings Calculator to make sure you are saving as much money as you can. Remember you will only have this flexibility until the voucher scheme closes to newbies in April 2018 so make the most of it now!