Tax Free Childcare is a government scheme to help working families with their childcare costs.
The scheme will allow parents to open online childcare accounts to pay their registered childcare providers directly. For every £8 parents pay in to these accounts, the government will contribute £2, the total amount in the account can only be spent on childcare. Parents can receive up to £2,000 in government support per child, per year or £4,000 for disabled children.
You will need to have signed up for Tax Free Childcare to be able to receive payments from any of your customers via the scheme.
- Parents will use their online childcare account just like a bank account to pay childcare providers.
- They’ll be able to track how much they’ve paid in and how much they’ve spent for each child.
For childcare professionals:
- You can sign up online for Tax-Free Childcare, allowing parents to pay for childcare directly into your bank account.
- Each child will have a unique reference number, so you’ll be able to identify which payments cover which children.
- Once you’re signed up, parents will be able to find you on HMRC’s online tool which lets parents search for local childcare providers who can be paid using Tax-Free Childcare.
The government top-up will be added into the parent’s online account on the same day, and the total amount will be available to pay for childcare.
The accounts will use the BACS system, so payment should only take two to three working days to arrive in your bank account. When you receive a payment from a parent, it will include both their payment and the government contribution.
Parents could be eligible for Tax-Free Childcare if they:
- Earn at least £131 per week but less than £100,000 per year
- Don’t receive childcare vouchers, tax credits or Universal Credit
- And, have children who are under 12, or under 17 for disabled children
While parents can’t use Tax-Free Childcare at the same time as childcare vouchers, childcare providers who are signed up to Tax-Free Childcare can receive payments from both schemes.
It’s very simple to sign up. You should have received a letter from the government containing your unique ID which you will need to start the online process. Once you are in the secure site you will need to:
- Confirm your unique taxpayer reference (UTR) number. You can find this on previous tax returns or other communications from HM Revenue and Customs; or your National Insurance number if you are a nanny and don’t have a UTR.
- Provide bank details for the account you wish to receive Tax-Free Childcare payments into.
You can use this short guide to help you get ready for Tax-Free Childcare: https://www.gov.uk/government/news/tax-free-childcare-top-things-childcare-providers-should-know (external link).