More than one million families could be missing out on thousands of pounds, according to a new report for HMRC admitting that take-up of the Tax-Free Childcare scheme has been lower than anticipated.
The scheme, which essentially gives eligible families 20% off childcare costs, is worth up to £2,000 a year per child. However, pensions firm Royal London’s analysis shows that only around one in 10 of the 1.3 million families eligible have made a claim.
The report found that eligible parents weren’t claiming due to factors such as a lack of awareness or understanding of the scheme, as well as issues logging into the Tax-Free Childcare site and making payments. Some families may also be using alternative schemes such as childcare vouchers.
How does it work?
Under the scheme, parents and carers in the UK can open an account where, for every 80p they deposit, the state adds 20p. In total, the state can add up to £2,000 per child per year (or up to £4,000 if your child is disabled) – so including what you deposit, you can use the scheme to pay for up to £10,000 of childcare per child each year.
Tax-Free Childcare can be used to pay for nurseries, playgroups, childminders and after-school clubs. The key element is that your childcare provider will need to be registered with a regulator such as Ofsted and be part of the scheme.
Am I eligible?
The scheme is available for working parents of children up to and including the age of 11 (or until they turn 17 for disabled children). To qualify, you (and your partner, if you have one) need to be working and earning a minimum of £131 a week from April – the equivalent of 16 hours/week at the national minimum wage for 25-year-olds or over. Each parent also needs to earn less than £100,000 a year.
You’re still eligible if you’re self-employed, on paid sick leave or are unable to work and claim certain benefits.
How do I apply?
The first step is to create an online childcare account via the Government’s Tax-Free Childcare site which will take around 20 minutes to set up.
You’ll be able to pay money in using your debit card, by setting up a standing order, or by making a payment from your bank account. Only one parent can open the account – though both can use it. Every three months, you’ll need to ‘reconfirm’ your eligibility via your childcare service account. Simply click on the box saying your circumstances haven’t changed.
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