What is it?
Families in the UK are failing to take advantage of a tax credit that could give them £2,000 a year towards childcare costs.
Tax-free childcare is a 20% top-up which allows those families that qualify up to £500 every three months (£1,000 if their child is disabled). The money can be used for a variety of things, from nursery and childminder fees to after school or holiday clubs.
It is available to children up to the age of 11, rising to 17 if a child is disabled. Adopted children qualify for the scheme but foster children do not.
How does it work?
The way it works, is that an online account is created – each child must have their own account. Once it’s confirmed that the family qualify, funds can be added to the account. For every £8 that’s deposited the government will top up an additional £2.
The good news is that accounts can be set up at any time and used straight away meaning that the tops start as soon as the account is opened. You can get Tax-Free Childcare at the same time as 30 hours free childcare if you’re eligible for both.
Unfortunately, if you receive tax credits, universal credit, childcare vouchers, a bursary or grant, you will not qualify for the scheme. Which scheme you’re better off with depends on your situation.
What should I do next?
There are various criteria that families will need to meet to qualify for the scheme. Navigating your way through tax schemes can be confusing and difficult. If you think that Tax-free childcare is suitable for you, we strongly advise you to speak with your advisers who can help you wade through the maze of information you need to provide to HMRC. They can help you determine which scheme is best suited to you and your family’s needs and then help you with the steps you need to take to move things forward.
If you’d think you qualify, and would like to discuss things further, then please contact us at info@oldfieldadvsory.com or call 02476673160 and we can arrange a convenient time to take you through the process and determine whether it will work for you.
Please note: This article is provided for information only and was correct as at time of writing (02/02/22). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance. No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.
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