Tax-free childcare – a reminder

Children must be aged 11 or under, or 16 and under if they have a disability, to be eligible for tax-free childcare. They stop being eligible on 1 September after their 11th birthday. If their child has a disability, on 1 September after their 16th birthday. Families with a disabled child up to the age of 16 were able to sign up for tax-free childcare in April 2017.

Under these rules, for every £8 a parent pays into their childcare account, the Government will pay an extra £2 – up to a maximum of £500 (£1,000 if the child is disabled) per three-month entitlement period. This means that it is possible to receive up to £2,000 support per child, per year and £4,000 per child, per year if they are disabled. 

Each eligible child requires their own tax-free childcare account. If families have more than one eligible child, they will need to register an account for each child. The Government top-up is then applied to deposits made for each child, not household.

Separated or divorced parents cannot register an account separately for the same child. Account holders must confirm their details are up to date every three months to continue receiving the government top-up. Childcare providers can also sign up for a childcare provider account via GOV.UK to receive payments from parents and carers via the scheme.

Tax-free childcare is run by HMRC with their delivery partners National Savings & Investments (NS&I). Once an account is opened, parents can deposit money and use it straight away or keep it in the account to use when it’s needed. Tax-free childcare can be used flexibly to pay for childminders, wraparound childcare, such as after school clubs, and holiday childcare, such as school holiday care. Parents pay into and make payments to childcare providers out of the same account. Parents are able to withdraw money for other purposes, but will lose the Government top-up on anything removed.

Whether a family can access tax-free childcare may also depend on their preferred childcare provider. Childcare providers need to be signed up to tax-free childcare before a family can make payments to them.

In order to qualify for tax-free childcare, families must have all adults earning the equivalent of at least the national minimum or living wage for 16 hours per week, and must not have an ‘adjusted net income’ of £100,000 or above as they lose eligibility to tax-free childcare so, depending on individual circumstances, this may be an area in which planning maybe worth considering. In addition, they must not be claiming tax credits or universal credit in any form or other disqualifying benefits such as Job Seeker’s Allowance.

Example:

Steve and Maria are married. They have one young child. Maria works 20 hours a week, earning £22,300. Steve has earned income of £86,000, rental income of £16,000 and interest income of £4,200. This means his total income is £106,200. As this is above £100,000, he would lose entitlement to tax-free childcare. However, if he were to either make a personal pension contribution or a gift aid donation (or both!) of £6,200 gross, his ‘adjusted net income’ would reduce to £100,000 meaning he would be eligible to claim tax-free childcare. 

Free childcare hours

Since September 2017, families in England with three- or four-year-old children can benefit from 30 hours of free childcare per week. To qualify, all parents must earn at least the equivalent of the national minimum or living wage for 16 hours a week and not have taxable income of £100,000 a year. You can still qualify even if you receive tax credits, universal credit, or childcare vouchers.

Applications for the two offers are linked and accessed through the same online portal.

From April 2024, working parents with two-year-olds became eligible for 15 free hours per week. In September 2024, this was extended to include children from nine months old.

Starting in September 2025, the 15 free hours for children under three will increase to 30 hours. So, eligible working parents will get 30 hours of free childcare per week from when their child is nine months old until they start school.

You apply for all of these through the same online portal. It says that anyone who currently receives 15 hours for working parents, just needs to reconfirm as usual and the code will work for the 30 hours offer in September, providing they remain eligible. 

For more information about tax-free childcare, including how to register, please see HMRC’s guidance.

Separately HMRC has also issued a reminder for parents of 16 to 19 year olds to extend their Child Benefit claim by 31 August if their child is staying in education or training or payments will automatically stop. Child Benefit will automatically stop on 31 August on or after a child’s 16th birthday if it’s not extended. 

Between May and July, letters will be sent to parents reminding them to go online to confirm if their teenager is staying in full time education or approved training after they finish their GCSEs to continue receiving their Child Benefit.

Parents can extend their claim via the HMRC app or online on GOV.UK.