Tax free Child Care

Posted By: Hazel Richardson on 6th January 2022

Tax Free Childcare

One of the most frequently asked questions that I receive is on tax free childcare. This is really quite a generous scheme from the government and you might be surprised to find that you are eligible.

The scheme pays up to £500 every three months or £1,000 every three months if your child is disabled and this can be used to pay for nannies, as well as other types of childcare.

Eligibility for tax free childcare

Each parent must earn under £100,000 per annum.
You must be able to show that you will earn a certain amount over the next three months – roughly this is based on the national minimum wage.
Have a child living with you.
Have a child under 12, or under 17 if disabled.
Be in paid work (both parents/carers or the single parent). Working includes both employed or self-employed with an expected income of at least £115 a week on average.
Not be receiving other government support towards the cost of childcare (i.e., childcare vouchers, tax credits, universal credit etc)

How tax-free childcare works

You can open an online childcare account for each of your children, find their childcare provider via a search facility, and set-up payments to their childcare provider.
For every £8 you pay into your childcare account, the government will automatically pay in an extra £2.
You can benefit by up to £500 per child every three months (£2,000 per year) towards your childcare costs.
Parents/carers manage tax free childcare via an online childcare account.
Click here to sign-up.

How it works for nannies

Your nanny must be registered with a regulator (i.e. Ofsted) in order for you use tax-free childcare.
As a nanny employer, you will be able to send payments directly from your online childcare account into your nanny’s bank account, provided that your nanny is signed up to the system.

Other options

If tax-free childcare is not suitable for you, other options may suit you:

For more information, go here or give me a call: 01732 838417. I’d be happy to chat through your options with you.