Tax-free childcare is a Government-backed scheme which helps parents with the cost of childcare. The scheme, which launched in 2017, gives eligible families an extra 20% towards childcare costs. It’s slowly replacing the outgoing Childcare Vouchers scheme, which closed to new entrants in October 2018. However, it’s still available to those who are a member of a scheme.
Tax-free childcare is designed so that for every 80p you put in, the state will add 20p – so it effectively gives you basic-rate tax back on what you pay. Hence the scheme’s name.
In total you’ll be able to use the scheme to pay for up to £10,000 of childcare per child each year (meaning you’d pay £8,000) – so you could get an extra £2,000 per child (up to £4,000 if your child is disabled) each year. Once your childcare bill exceeds the Government maximum, there’s no more financial support for that year. You can still pay for your childcare through the scheme but you won’t get a top up so it might be easier just to pay your childcare provider directly.
It’s open to all qualifying parents. This includes anyone who’s self-employed. However, you will need to be in work to qualify. Therefore, if you work and your partner doesn’t, you won’t be able to take advantage. Tax-free childcare is also available to single parents.
The scheme is available until the 1 September after your child turns 11 (or 16 for children with disabilities).
Many parents can save £100s a year using childcare vouchers, which allow you to pay for childcare from your pre-tax salary. The scheme closed for new applicants in October 2018. However, if you were signed up before then, are with the same employer, and it still offers them, you can continue to get childcare vouchers.
So which one is the best? Tax-Free Childcare or childcare vouchers?
What works out best will depend on your personal circumstances. But you have to settle for one as you can’t apply for both. If you’re still not sure, we recommend you visit this handy Childcare Vouchers vs Tax-Free Childcare analysis.
We hope you’ve found this Info Sheet handy and if you have anything to add to it, we’d love to hear from you!
Find your nearest Holiday Camp below. Feel free to give us a call on 0121 296 9204 if you have any questions or would like to book with childcare vouchers.