Tax-Free Childcare – how it works and how to benefit from it

Tax-Free Childcare is available as a childcare top-up for working parents offering up to £2,000 a year.

Additionally, this can also be used to help pay for accredited holiday clubs, sports activities or childminders, which will help keep children entertained over the summer holiday period. Today HM Revenue and Customs (HMRC) issued a reminder that Tax-Free Childcare can be used over the summer to help pay for childcare costs.

HMRC Tax-Free childcare – what is it?

Tax-free Childcare is a childcare top-up for parents who are working. This can be used to assist in pay for accredited childminders, sports activities or holiday clubs. The aim is to provide parents and carers with extra peace of mind and to help save them money.

Who is eligible for Tax-Free Childcare?

The Tax-Free Childcare scheme is available for children aged up to 11, or up to 17 for children with a disability. For each £8 deposited into a Tax-Free Childcare account, families will receive an additional £2 by way of a government top-up. There is a cap of £500 every 3 months, which increases to £1,000 for disabled children.

HMRC claims that more than 282,000 working families benefited from this in March 2021, the scheme was originally launched in 2017, and this March 2021 figure is the highest to date.

The Tax-Free Childcare scheme is also available for pre-school aged children attending childminders, nurseries or other providers of childcare.

Tax-Free childcare accounts – how to apply

Working parents or carers can apply for an account at any time and use it straight away. Families and carers benefit from the 20% top-up by depositing money into their account, which they can then pay for childcare costs as they need it.

Tax-Free childcare login for each child

A separate Tax-Free Childcare account is required for each eligible child. For families or carers with more than one eligible child, they will therefore need to register an account for each eligible child. The Government top-up of 20% is then applied to deposits made for each individual child, not per household.

Government childcare accounts – keeping it up to date

To continue receiving Government top-ups, account holders must confirm their details are up to date every 3 months within their government childcare accounts.

Childcare provider registration

Childcare providers can sign up for a childcare provider account on the GOV.UK website. This will enable them to receive payments from parents and carers through the scheme.

Further information

For further information on the scheme and to create an account, you can visit the GOV.UK website here.

Alexander & Co – advice on a wide range of family tax and accountancy issues

Alexander & Co has an expert team of advisors that deal with a wide range of family matters, encompassing both tax advisory and accountancy within our family business services.

Our personal tax team provides individuals with tax advisory and strategic tax planning advice, to optimise exemptions and tax relief, whilst making sure that you remain compliant with the tax rules. Here we frequently advise on capital gains tax, income tax, Self Assessment tax and tax issues.

We also regularly advise personal clients on trusts and inheritance tax planning, often for asset protection. Trusts can often be an effective way to set aside assets for future recipients outside the inheritance tax net.

We also regularly deal with a wide range of tax planning and other tax issues with regards to matrimonial issues, including divorce.

Our team also advises on residence and domicile and deals with cross border tax planning, assisting both British and overseas nationals on a wide range of personal tax issues.

To contact us, call 0161 832 4841, email info@alexander.co.uk or complete the form below with the details of your enquiry and we will be in touch.

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