Parents looking for ways to reduce childcare costs may find an important opportunity in a government scheme that offers financial assistance. The program, detailed by Leicester Mercury, allows eligible families to receive substantial savings on various childcare services.
With the 2025/26 financial year nearing, it’s important to understand the specifics of this support and how it can benefit those who qualify. Time is of the essence for families to take advantage of this potential financial relief.
What is Tax-Free Childcare?
Tax-Free Childcare offers working parents the chance to receive a government top-up of up to £500 every three months, or up to £1,000 for parents of disabled children. For every £8 parents contribute into their online account, the government adds an extra £2, which can be used for a range of childcare services including nurseries, childminders, breakfast clubs, and holiday activity clubs.
Parents can save up to £2,000 per child annually, or £4,000 if the child has a disability for the 2025/26 financial year. This can significantly reduce childcare costs for working families.
Who is Eligible?
To qualify for Tax-Free Childcare, families must meet specific criteria. Parents must earn at least the National Minimum Wage or Living Wage for 16 hours per week on average. Additionally, parents cannot be receiving Tax Credits, Universal Credit, or childcare vouchers in conjunction with the scheme.
The child must be aged 11 or under, or up to 16 if the child has a disability. However, eligibility ends on September 1 after their 11th birthday, while for children with disabilities, it extends until September 1 after their 16th birthday. Lastly, the combined household income must not exceed £100,000 per year.
How to Apply
The application process for Tax-Free Childcare is straightforward and can be completed online in about 20 minutes. Parents will need to provide several documents including their National Insurance number and Unique Taxpayer Reference (UTR) if self-employed, as well as the UK birth certificate reference number for the children.
Proof of income is also necessary, such as pay slips, bank statements, or evidence showing that the parent is self-employed or a director. For directors, HMRC may require additional documentation, such as PAYE records, invoices, or a letter from an accountant confirming income.
Once the account is set up, parents can begin depositing funds immediately, and the government top-up will be applied. Unused funds can be withdrawn at any time, providing flexibility for families in managing their childcare costs.
Key Considerations for Self-Employed and Directors
Self-employed parents or directors must provide specific evidence showing that they meet the minimum income requirements.
This could include copies of invoices, wage slips, and bank statements. Alternatively, a statement from an accountant or year-end payroll documents may be required. A letter from a tax agent confirming that salary has been paid and taxed, or annual wage slips for verification, might also be necessary.
