Tax free childcare is now a possibility for working parents with children up to the age of 12 – saving up to £2,000 a year thanks to a new government scheme.
Parents may be able to save up to £2,000 a year on childcare costs thanks to the government’s new tax-free childcare scheme.
The initiative, originally launched last April for children up to the age of nine, is now available to all under-12s, HMRC confirmed on Wednesday 14th February 2018.
This means that working parents can save money and get financial support towards the cost of nurseries, play groups or after school clubs for their children.
In a statement, HMRC said more than 190,000 parents have successfully applied for the scheme since April 2017.
The new system means that the government will contribute 20p for every 80p that parents pay into a special online account, with the money in that account being used for childcare costs.
This is the equivalent of the 20% tax many people pay on their earnings – hence the name ‘tax free’.
Liz Truss, Chief Secretary to the Treasury, said: ‘Tax-free childcare will cut thousands of pounds from childcare bills and is good news for working parents.
‘More parents will be able to work if they want to and this demonstrates our commitment to helping families with the cost of living.’
Am I eligible for tax free childcare?
You can apply for the scheme if your child is under the age 12 – or 17 if they have a disability.
Either parents or a single parent must be working and each earning at least £120 per week and not more than £100,000 each year.
Self-employed people with a registered business can also apply.
Households where one parent earns more than £100,000 cannot take part in the scheme.
While both parents must be working to qualify, those temporarily absent from the workplace such as those on paid or unpaid maternity, paternity or adoption can still claim.
It is only available to families in England.
How do I apply for tax free childcare?
You can apply online by visiting Childcare Choices – you’ll need your national insurance number and passport or driving licence.
You’ll need to reconfirm your eligibility every three months.
HMRC will then review your application, and if you fit the criteria, you’ll be invited to open a childcare account through NS&I.
Money in this account must be used to pay for childcare costs. If you no longer wish to use the scheme, you’ll be able to take your money back out but you won’t get the bonus paid in by the government.