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Northampton: 01604 630745
Rugby: 01788 575037
Tax-Free Childcare provides tax relief for individuals on their qualifying childcare costs. This factsheet considers the key principles and requirements.
Tax-Free Childcare replaced Employer Supported Childcare, and has the advantage that the self employed, as well as employed individuals, can make use of the scheme. At J R Watson & Co Accountants, we can provide guidance on Tax-Free Childcare and Employer Supported Childcare in the Northampton and Rugby or surrounding areas.
The government has introduced a tax incentive for childcare Tax-Free Childcare (TFC).
Under TFC the tax relief available is 20% of the costs of childcare up to a total of childcare costs of £10,000 per child per year. The scheme will therefore be worth a maximum of £2,000 per child (£4,000 for a disabled child). Parents are able to apply for TFC for children under 12 (up to 17 for children with disabilities).
To qualify for Tax-Free Childcare all parents in the household must generally meet a minimum income level, based on working 16 hours a week (on average £142 a week) and each earn less than £100,000 a year and not already be receiving support through Tax Credits or Universal Credit.
Parents are able to register with the government and open an online account. The government will then 'top up' payments into this account at a rate of 20p for every 80p that families pay in.
Self-employed parents are able to get support with childcare costs using the TFC scheme, unlike employer supported childcare scheme. To support newly self-employed parents, the government have introduced a 'start-up' period. During this period a newly self-employed parent will not have to earn the minimum income level.
All parents of eligible children can apply for both 30 hours of free childcare and TFC via a single website. Parents can apply online through the childcare service which can be accessed via the Childcare Choices website.
HMRC acknowledges that some parents did not receive the intended level of service when using the website and that they have subsequently made significant improvements. For those parents who have had difficulties in accessing the service, compensation may be available: see childcare service compensation.
Only childcare providers registered with a regulator can receive Tax-Free Childcare payments.
Employer Supported Childcare (ESC) closed to new entrants in October 2018. ESC continues to be available for current members if they wish to remain in it or they can switch to TFC but parents cannot be in both ESC and TFC at the same time.
If you are in the Northampton and Rugby area please do contact us for guidance on Tax-Free Childcare.
06 Oct 2021
The government has delayed the introduction of Making Tax Digital (MTD) for Income Tax Self Assessment (MTD for ITSA) for a year.
From April 2022, the government plans to create a new social care levy which will see UK-wide tax and National Insurance Contribution (NIC) increases.
HM Treasury has announced that Chancellor Rishi Sunak will deliver the Autumn 2021 Budget on Wednesday 27 October.
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