Childcare voucher alternative, tax-free childcare alternative

Tax-free childcare

Good news for the Government, the usage of Tax-free childcare is on the rise.

According to the latest survey published over the summer 141,000 families used Tax-Free Childcare for 170,000 children in June 2019.  This represents an increase of over 80,000 families using the scheme when compared to the same period in 2018.

However, account usage was considerably lower for children aged 5 and over with only 28,000 using the scheme.  The numbers are still below the initial Government forecasts, partially driven by a lack of employer involvement and the limited number of uses but if you’re a parent with young children, the scheme can definitely help lower the cost of childcare.

 

Childcare voucher alternative, tax-free childcare alternative

To recap:

The scheme works by providing you with an extra 20% on top of whatever you’ve saved into your online account.  Primary uses are with childminders, nurseries, and nannies but they must be registered childcare providers and set up with the scheme before you can pay them.  There are eligibility criteria attached to the scheme, which we’ve listed out below:

If you require any further information, then check out the Government’s childcare choices website.

Eligibility Criteria.

You’re in if:

  • Both parents work or a sole parent is working
  • Both parents earn over £125 per week
  • Your children are under 12 or 17 if disabled

You’re out if:

  • One parent doesn’t work or is studying
  • Either parent earns over £100,000
  • If your child does not usually live with you

Tax-free childcare can ONLY be used with a registered childcare provider, such as a nursery or childminder and can be used up until your children are 11 or 17 if they are registered disabled.

How the scheme works.

The scheme works on a per-child basis.

You need to register and set up an online account.

You then pay money into your account each month, after which the Government will give you a 20% top-up, up to a maximum of £500 every 3 months, which equates to £2,000 per year.

You will then be able to pay registered childcare providers directly from your account.

A few more do’s and don’ts.

Do.

Tax-free childcare can be used in conjunction with the 15 & 30 free hours scheme.

Don’t.

Tax-free childcare cannot be used in conjunction with Universal credit, Tax credits or childcare vouchers.

 

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