PARENTS trying to save some cash can apply for tax-free childcare. The tax-free childcare scheme means you can get up to £500 every three months
PARENTS trying to save some cash can apply for tax-free childcare.
The tax-free childcare scheme means you can get up to £500 every three months – up to £2,000 a year – for each of your children.
Parents can now apply for tax-free childcare which could save them thousands[/caption]
But how do you get it and who is eligible for the cash? We explain all you need to know.
What is the tax-free childcare?
All working parents with children who are 11 or under can apply for the Government’s tax-free childcare scheme.
The initiative could save parents £2,000 a year on childcare costs.
This goes up if your child is disabled – the maximum amount you could get rises to £4,000.
The scheme essentially works like a savings account where for every £8 you save towards childcare costs, the government tops up an extra £2.
So if you put away £8,000 a year for one child, the government will give you £2,000 totally free.
The scheme launched in 2017, but over a million families are missing out on the cash because they haven’t applied.
HMRC figures from last year showed that around 90 per cent of people who are eligible for the benefit haven’t used it.
What help is available for parents for childcare costs?
CHILDCARE can be a costly business but here is how you can get help:
- 30 hours free childcare – Parents of three and four-year-olds can apply for 30 hours free childcare a week. To qualify you must work at least 16 hours a week at the national living or minimum wage and earn less than £100,000 a year.
- Tax credits – For children under 20, some families can get help with childcare costs.
- Tax-free childcare – Available to working families and the self-employed, for every £8 you put in the government will add an extra £2.
Martin Lewis’ MoneySavingExpert urged Brits earlier this month to put in a claim, and estimated that 1.3million families are missing out.
The consumer website also reminded parents that to get the full £2,000 per child, you need to reconfirm your eligibility four times a year to keep your account active.
You should receive a message from the Government around four weeks before your reconfirmation date.
Am I eligible?
Working parents need to earn at least the minimum wage, for the equivalent of 16 hours a week, to be eligible for tax-free childcare.
If you have a partner, they’ll need to expect to earn at least this much too.
Self-employed workers are also eligible, providing they earn this amount too.
If you are self-employed and you don’t expect to make enough profit in the next three months, you can use an average of how much you expect to make over the current tax year.
The earnings limit does not apply if you’re self-employed and started your business less than 12 months ago.
Both partners will also have to earn less than £100,000 a year to be eligible.
You and your partner cannot both have accounts for the same child.
You usually have to be working to claim tax-free childcare, but there are some exceptions.
Parents may still be eligible if one of you is working and the other gets Incapacity Benefit, Severe Disablement Allowance, Carer’s Allowance or Employment and Support Allowance.
Before you apply for tax-free childcare, check if you even need to pay for childcare.
For example, parents of three and four-year-olds can apply for 30 hours free childcare a week.
Is my child eligible?
Your child must be aged 11 or under and usually will need to live with you.
Each child stops being eligible on September 1 after their 11th birthday.
Adopted children are eligible, but foster children are not.
If your child is disabled you may get up to £4,000 a year until they’re 17.
To receive this, your child will need to:
- Get Disability Living Allowance, Personal Independence Payment or Armed Forces Independence Payment
- Be certified as blind or severely sight-impaired
How is the money paid and how do I apply?
Cash is added by the government upfront directly into parents’ childcare accounts
You then need to spend this cash on a registered childcare provider.
Nearly 60,000 registered childcare providers are signed up, including nurseries, nannies, childminders and school clubs.
You can apply for the tax-free childcare scheme online via Gov.uk.
Before you apply, you need to have some important details handy first – this includes your National Insurance number and your Unique Taxpayer Reference if you’re self-employed.
According to the Gov.uk website, it takes 20 minutes to apply.
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