HMRC will provide a £500 boost to help struggling parents meet the costs of summer childcare throughout the school holidays.
Understanding HMRC's Tax-Free Childcare: Benefits, Eligibility, and Application Details
Tax-Free Childcare supported 966,000 children from 740,000 households during the fiscal year 2023/24. This program provides up to £500 every three months (up to £2,000 annually) per child for childcare expenses. For children with additional needs, the amount increases to £1,000 every three months (up to £4,000 annually), as detailed on the government website.
If you receive tax-free childcare, you will create an online childcare account for your child. The government will pay £2 for every £8 you deposit into this account, which you can then use to pay your provider. You can receive both Tax-Free Childcare as well as 15 or 30 hours of free childcare if you qualify for both.
HMRC estimates that it takes only 20 minutes to submit an application online for a Tax-Free Childcare account that may be used to pay for approved childcare, such as childminders, nurseries, and nannies, or after school clubs and play schemes.
Once set up, parents can deposit money instantly, which remains available for immediate use. Unused funds can be withdrawn at any time.
Eligibility Criteria for Tax-free Childcare
Households could be eligible for tax-free childcare if they:
- Have a child or children aged 11 or under. They lose eligibility on September 1 following their 11th birthday.
- Make, or anticipate to make, at least the National Minimum Wage or Living Wage for 16 hours per week, on average.
- Each earns no more than £100,000 annually.
- Do not get Tax Credits, Universal Credit, or childcare vouchers.
Upon approval of a Tax-Free Childcare application, Tax Credits will cease immediately, and recipients must cancel any Universal Credit and childcare vouchers. HMRC strongly advises individuals to carefully consider their options before submitting an application.
