Tax Free And Funded Childcare Explained

Updated: Apr 7



To help parents cover the costs of childcare, the Government offers a range of childcare funding options. If you need any help with understanding childcare funding, please call our team and we will be happy to assist you.


The Tax Free Childcare Scheme


The Governments Tax-Free Childcare Scheme Offers up to £2000 per year for childcare, per child or up to £4000 per year if your child is disabled. It is like you are being credited back some of the income tax on the money you’re going to be spending on childcare, hence why it is called Tax-Free Childcare Scheme.


How It Works?


If you are eligible then you simply open a Tax-Free Child Car account on the government website: https://www.gov.uk/apply-for-tax-free-childcare . For every 80p you pay in the government pays in an additional 20p, by using this approach you can save up to £10,000 for childcare per child that you have registered in your tax-free childcare account.


Rules For Eligibility:


· Available to parents of children aged up to 11 years old and 17 if they are disabled.


· You and/or your partner are working (It still applies if you are a single parent)


· If only one of you is working and the other is in receipt of specific benefits the other could still be eligible. Specific benefits include, disablement and incapacity allowances, Carer’s Allowance, contribution-based employment & support allowance and National Insurance credits awards for incapacity/limited capacity to work.


· If you aren’t working but will start working within the next 31 days you can still apply.


· Being off with sick pay doesn’t affect your eligibility.

· Each partner in the household, if there is more than one need to be earning £140 per week or more, this is in line with the national minimum wage.


· If you are self-employed you will have to use an average of the next three month income or a full tax year to see if you are eligible.


· Each parent must earn less than £100k per year.


· Those on maternity, paternity or adoption leave are still eligible but can only apply for children they are not on leave for.


· Chosen childcare provider must be registered for the Tax-Free Child Care Scheme as well as at least one of the following: Ofsted, The Early Years Register or The Childcare Register.


Is Eligibility Affected If Work Has Been Reduced Due To Coronavirus Measures?


No, if you are temporally working less or work has been limited due to Coronavirus restrictions you will still be eligible to claim.


How To Apply For Tax-Free Childcare?


Applications take around 20 minutes to fill in, you will need your National Insurance number, and your UTR (Unique Taxpayer Reference) if you are self-employed. If you are making a joint claim with your partner, they will require the same things however only one account is needed for the both of you.


Once your application is accepted, which is usually quite a fast process, the governments 20% contribution will go into your account within a few hours of you making your first credit to your account. It is worth noting that the maximum amount you can credit you can receive by the government per quarter is £500.


Tip: If you pay into your account by bank transfer the governments payments will land in your account faster then if you pay in by direct debit or standing order.


How to Pay Your Chosen Childcare Provider


Once you have available funds in your Tax-Free Childcare account you can send these directly to your childcare provider, you can simply select them from within the account and transfer the required amount. Payments usually arrive pretty fast although if it is a weekend or bank holiday it may take longer. It is always best to allow three working days to be on the safe side.


Funded Childcare for 2,3 and 4 Year Olds


All children aged 3 and 4 are eligible for 570 hours of funded childcare per year, this is often taken as 15 hours per week over 38 weeks of the year.


Also, if you meet certain criteria you may be eligible for up to 15 hours of funded childcare per week for your 2 year old.


There are some 3-4 year olds that will be eligible for 30 hours of childcare per week, eligibility for this includes:


· If you’re working.


· Yours and your partners income if you have one.


· Childs age and circumstances


· Immigration status


You can apply for funded childcare via the government’s website: https://www.gov.uk/apply-30-hours-free-childcare


At Rosedene Nurseries we have 15 and 30 hours funded places for 2, 3 and 4 year olds as well as Tax-Free Childcare. We welcome all funded children and encourage parents to take advantage of the funded hours offered to them. Contact us for more information or help regarding Tax-Free Childcare or Funded Childcare .

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