Understanding Tax-Free childcare

Tax-Free Childcare helps working families save money on childcare and early education bills and thousands of early years providers are now signed up to the scheme. HMRC has provided answers to some of the most common questions from settings about the offer.

Tax-Free Childcare provides working families, including those who are self-employed, with financial help to pay for childcare and early education.. Families can get up to £2,000 per year per child to pay for any approved childcare for children aged 11 or under, or up to £4000 a year per child aged up to 16, if the child has a disability – whether the child goes to nursery, pre-school, a childminder, attends breakfast or after-school clubs, as well as out of school activities or holiday clubs.

The support means that for every £8 paid into an online Tax-Free Childcare account, families will automatically receive an additional £2 from the government.

Each child requires their own Tax-Free Childcare account. If families have more than one eligible child, they will need to register an account for each child. The government top-up is then applied to deposits made for each child, not each household.

Tax-Free Childcare replaced childcare vouchers, which are no longer open to new applications. Parents are not able to use childcare vouchers and Tax-Free Childcare together – they can visit the Childcare Choices website to decide which is the best childcare offering for them.

As a provider, even if you are signed up to Tax-Free Childcare, you can still accept childcare vouchers as well.

Any approved or registered early years providers, including childminders, nurseries, pre-schools, nannies, holiday activity clubs, breakfast and after-school clubs, can sign up to receive Tax-Free Childcare payments.

It’s straightforward to sign up. You will have received an invitation letter to join the scheme from your care regulator. You’ll need: your 11-digit user ID from this letter, your bank account details and your business postcode. Once you have signed up, you will get a provider account which you can manage yourself and set up with your own bank account details. Parents who use Tax-Free Childcare will be able to pay you directly into this account.

Go to Childcare Choices for more details of how to sign up and what it means for you.

As a childcare provider, it makes sense to sign up to the scheme to receive Tax-Free Childcare payments. Once you’ve signed your business up to receive payments, you will be included on a list of settings parents can choose from. You may also find that once you can receive Tax-Free Childcare payments, parents may decide to increase the number of paid-for hours they use each week, which could create additional income for your business.

The latest figures show that more than 405,000 working families are currently benefitting Tax-Free Childcare. You will only be able to receive Tax- Free Childcare payments if your early years setting is signed up. Go to Childcare Choices to find out more and sign up.

Yes. Parents can use both the 15 or 30 hours offer and Tax-Free Childcare together, as long as the provider is signed up to receive payments.

Parents should go to the Childcare Choices website, use the calculator to see how much they can save when paying for their approved childcare and/or early education.

Providers don’t have to check parent eligibility. Every three months HMRC reminds parents to make sure their details are up-to-date and that they’re still meeting eligibility criteria to receive the government top-ups.

Parents and carers could be eligible for Tax-Free Childcare if they:

• have a child or children aged up to 11. They stop being eligible on 1 September after their 11th birthday. If their child has a disability, they may get up to £4,000 a year until 1 September after their 16th birthday
• earn, or expect to earn, at least the National Minimum Wage or Living Wage for 16 hours a week, on average
• each earn under £100,000 per annum
• do not receive tax credits, Universal Credit or childcare vouchers.