If you have children under 12 who attend a nursery, after school club, playscheme or childminder, or you are considering sending them to a summer camp, you should think about setting up a tax-free childcare account.
The government adds 25% to the amounts that you save in the account. For every 80p you pay in, the government will automatically add 20p – up to a maximum of £2,000 a year for each child (or £4,000 for disabled children).
The account is then used to pay Ofsted registered childcare providers. Note that it doesn’t need to be the child’s parents paying into the account; uncles, aunts, grandparents and others can also make payments,
The government have noticed that many families who are eligible for this scheme are yet to set up their accounts, so if you are an employer you could bring this to the attention of your staff to increase the take up.
Note that parents are not eligible if either of them have adjusted net income in excess of £100,000 for the current tax year.
You can get Tax-Free Childcare at the same time as 15 or 30 hours free childcare if you’re eligible for both. However, you cannot get Tax-Free Childcare at the same time as claiming Working Tax Credit, Child Tax Credit, Universal Credit or childcare vouchers.
Which scheme you are better off with depends on your situation. See www.gov.uk/tax-free-childcare where there is a childcare calculator to work out what type of support is best for you.
Please feel free to contact our Tax Team in our Taunton office at any time for help or more information.
This story was originally published as part of our ACM Insights Video series. You can watch the video here.
