Tax-Free Childcare

Tax-Free Childcare (TFC) has replaced Employer Supported Childcare, offering the advantage that both self-employed and employed individuals can benefit from the scheme. At AHACCOUNTANTS, we provide guidance on Tax-Free Childcare and Employer Supported Childcare in Nottingham and the surrounding areas.

Overview

Under TFC, the government offers a tax relief of 20% on childcare costs, applicable up to a maximum of £10,000 per child per year. This means families can receive up to £2,000 per child (£4,000 for a disabled child). Parents can apply for TFC for children under 12 years old, or up to 17 years for children with disabilities.

To qualify for TFC, all parents in the household must generally meet a minimum income level, which is based on working 16 hours a week at National Minimum Wage or Living Wage rates. Each parent must also earn less than £100,000 per year and not be receiving support through Tax Credits, Universal Credit, or the childcare voucher scheme.

Online Account

Parents can register with the government and open an online account. The government will then ‘top up’ payments into this account at a rate of 20p for every 80p that families contribute.

Self-Employed Eligibility

Self-employed parents can access support for childcare costs through the TFC scheme, unlike the previous Employer Supported Childcare voucher scheme. To assist newly self-employed parents, the government has introduced a ‘start-up’ period during which they are not required to meet the minimum income level.

TFC and Service Issues

All parents of eligible children can apply for both 30 hours of free childcare and TFC through a single website. Applications can be made online via the childcare service accessible through the Childcare Choices website.

Childcare Providers

Only childcare providers registered with a regulator are eligible to receive Tax-Free Childcare payments.

Relation to Employer Supported Childcare

Employer Supported Childcare (ESC) closed to new entrants in October 2018. Current members may continue to participate, but they can switch to TFC if they choose. However, parents cannot be enrolled in both ESC and TFC simultaneously.

For personalized advice on Tax-Free Childcare and how it can benefit your family, please contact AHACCOUNTANTS today.