Parents may be overlooking the opportunity to benefit from tax-free childcare worth up to £2,000 annually, which can be utilized during the summer break. Tax-free childcare operates through an online account, where the Government contributes £2 for every £8 you deposit, specifically designated for childcare expenses.
Eligible individuals can receive up to £500 every three months, totaling £2,000 per year for each child. In the case of disabled children, the maximum amount is £1,000 every three months, amounting to £4,000 annually.
Opening a tax-free childcare account is free and can be done via the GOV.UK website in approximately 20 minutes. Children under 11 years old who reside with the applicant are eligible for tax-free childcare until September 1 following their 11th birthday, or until September 1 after their 16th birthday for disabled children.
To qualify for a tax-free childcare account, one must earn at least the national minimum wage for 16 hours per week, with an adjusted net income not exceeding £100,000 annually. Exceptions exist for individuals who have been self-employed for less than 12 months or are in specific circumstances where they are not actively working.
Funds from the tax-free childcare account must be used at registered childcare providers like nurseries, nannies, after-school clubs, and play schemes. Additionally, parents who are eligible for 15 or 30 hours of free childcare weekly, depending on their child’s age, may not need to pay for childcare services.
For children aged nine months and two years, working parents can access 15 hours of free childcare weekly, increasing to 30 hours starting September 2025. Parents of three and four-year-olds are entitled to 15 hours of free childcare weekly as a standard benefit, irrespective of their employment status.
Parents meeting the earnings criteria can claim the full 30 hours of free childcare for children aged three and four, and they can also benefit from tax-free childcare in addition to the free hours. Moreover, individuals claiming Universal Credit while being employed can reclaim up to 85% of childcare costs, capped at £1,031.88 for one child or £1,768.94 for two or more children.