The appeal comes as more families use the scheme for older children as well as those in early-years care. According to HMRC data reported by Birmingham Live, the number of families claiming Tax-Free Childcare for children aged eight and over has increased by more than 20 per cent compared with the previous year.
How the Tax-Free Childcare Scheme Works
Under Tax-Free Childcare, the Government adds £2 for every £8 that parents pay into an eligible childcare account. This gives families a 25 per cent top-up towards childcare costs covered by the scheme.
Parents can open a separate account for each eligible child. The money can be used immediately to pay registered childcare providers, or it can remain in the account until the family needs it. Any money that is not used can also be withdrawn.
Nearly 75,000 childcare providers across the UK are signed up to accept Tax-Free Childcare payments, according to the figures cited by Birmingham Live. The scheme can be used for different forms of care, including nurseries, holiday clubs and wraparound school provision such as after-school care.
HMRC says the support can also be used alongside the Government’s funded childcare hours, as long as the family meets the relevant eligibility conditions for both forms of assistance. Myrtle Lloyd, HMRC’s Chief Customer Officer, said Tax-Free Childcare could help families with summer childcare arrangements as well as care needed during the school term.
“Tax-Free Childcare can help with your summer childcare plans and, looking to the term ahead, with whatever type of care you require for your child,” she said. She also encouraged families who have not yet opened an account to check the scheme through GOV.UK.
Who Qualifies for the Payments
To qualify, families must have a child aged 11 or under. For children with a disability, the age limit rises to 16. Both parents, where there are two, must normally be working and each must earn at least the equivalent of 16 hours a week at the National Minimum Wage or National Living Wage. Neither parent can have an annual income above £100,000.
Families receiving Universal Credit cannot claim Tax-Free Childcare, and the scheme is also unavailable to people using childcare vouchers. According to HMRC’s figures, use of the scheme among families with children aged eight and above has risen by more than one fifth in a year. The increase suggests that parents are using the support beyond nursery-age childcare, particularly for holiday clubs and before- or after-school provision.
For eligible households, the maximum annual government contribution remains £2,000 for each child. Where a child has a disability, that annual limit is £4,000. HMRC is asking parents to check whether they meet the conditions rather than assuming the scheme applies only to younger children. Families who qualify can open an account for each eligible child and decide when to use the funds for approved childcare costs.
