Tax-free childcare and childcare vouchers: your guide to eligibility and how to benefit from them
As a working parent, finding a reliable childcare provider that works for you and your family isn’t always easy, but once you’ve found one, it really is a huge weight off your mind.
Knowing that your child is well taken care of in a safe, fun environment while you’re busy at work means you can get on with your day without any worries.
However, this vital service comes at a cost, and many families – especially those without grandparents to help out – can find that a large portion of their income goes towards childcare.
But don’t despair! Did you know there are government schemes designed to help you save money on childcare costs?
Currently, there are around 1.3 million families who are eligible for help with childcare costs, but an astonishing 800,000 are not taking advantage.
If you pay for childcare, you may be eligible for help.
What are the main childcare fund schemes?
The two main schemes are the childcare voucher scheme (CVS) and tax-free childcare (TFC). They may seem quite complicated at first, but once you’ve spent some time looking at which scheme is right for you, the financial benefit will no doubt outweigh the initial admin.
There are a number of key differences between childcare vouchers and the tax-free childcare scheme and it’s worth exploring both schemes to see if you’re eligible for either of them.
We’d also recommend using the government’s online childcare calculator to see which one would save you the most.
We want to provide you with an overview of your options for claiming childcare costs and to update you on some changes we’ve made here at Premier Education which make it easier to book activities online using your funding.
How do childcare vouchers work?
Firstly, you should note that the childcare voucher scheme closed to new applicants in October 2018. However, if you were already enrolled in this scheme and you are with the same employer, you can continue to benefit from this scheme.
The childcare voucher scheme is a salary sacrifice arrangement whereby employees agree with their employers to exchange some of their pre-tax salary for childcare vouchers, saving them money on tax and national insurance contributions.
Each eligible parent can sacrifice up to £243 a month from their salary to go into their Childcare Voucher account.
One benefit of the scheme is that the vouchers last for a long time, so may come in handy if you know you’ll need additional childcare over the summer holidays, for example. However, be aware that they cannot be refunded, so don’t collect more than you know you’ll use.
Researching the available schemes is crucial in working out what’s going to save you more.
Childcare vouchers eligibility
As mentioned, this scheme is no longer accepting new applicants. But for anyone already using this scheme, there are certain criteria to remain eligible:
- You must stay with the same employer
- You must make at least one payment into your Childcare Voucher account every 52 weeks
- You must not join the tax-free childcare scheme
If you’re on a low income, you may save more through Universal Credit, if you’re eligible. It’s always worth checking before you commit to a different scheme. To find out if you’re eligible for Universal Credit, visit the government information page.
How does tax-free childcare work?
The tax-free childcare scheme was introduced to replace the childcare voucher scheme, and is designed to offer up to £2,000 a year to help working parents with childcare costs.
It works by eligible parents opening up a separate, dedicated online account using their Government Gateway ID, which they pay money into, to fund childcare. For every £8 the parent adds, the government tops it up by £2.
Ultimately this scheme gives you the basic rate tax back on your childcare costs. One thing to note is that there is a £500 quarterly cap on the top up, but spreading out the payments you make into your account throughout the year if you have larger seasonal childcare bills would avoid this.
Using a childcare calculator is a great way to get started.
Tax-free childcare eligibility
In order to apply for tax-free childcare, you first need to make sure you meet the eligibility criteria:
- You must be employed, including self-employed
- Your child must be 11 or younger
- To qualify, you and your partner (if you have one) must earn at least the national minimum wage, but each earn £100,000 or less per year
- You can’t be accessing any other childcare funding scheme including Tax Credit or Universal Credit
Free hours for 3-4 year olds
Before enrolling in any scheme, we’d recommend checking if you’re eligible for free, government-funded childcare. If your child is three or four years old, you can get up to 30 hours of funded childcare per week.
There are some restrictions depending on how many hours you work, so making sure you are eligible for the right scheme is important.
Where can I use my childcare funding?
You can use tax-free childcare to pay for a wide range of childcare providers, all year round, including:
- Nurseries
- Childminders
- Au-pairs
- Nannies
- Holiday clubs
- Breakfast clubs and after-school clubs
However, they must be registered with the tax-free childcare scheme, so you must check with your provider.
Childcare funding is flexible, but you must check with your provider if they accept it.
Can I use the funding to pay for Premier Education’s services?
Yes, you can, but not all of our services accept childcare funding yet. However, this is something we are working hard to expand. Currently, all of our wraparound childcare services can be paid for using childcare funding.
Wraparound care is a rapidly growing service which provides much-needed childcare in those tricky before and after-school times. If this is something that would make your life so much easier, you can easily find out if your school offers it.
If they don’t, get in touch with them – they won’t know it’s an in-demand service unless you tell them! We have also put together a detailed guide on how to book wraparound care with us for your convenience.
More and more of our holiday camps now accept childcare funding, great news when you need some extra help over the summer! At the moment around 50 percent of camps accept funding, but this number is increasing.
When you find a camp through our online portal, we make it clear whether childcare funding is accepted. If it does accept funding, you’ll see a message saying: “This camp accepts childcare vouchers and tax-free payments”.
Premier Education makes childcare fun and stimulating!
We’ve made it easier than ever to book and pay using your funding
As well as working to increase the number of services that accept TFC and CVS, we’ve recently transformed our online booking system to make it quicker and easier to book activities using your funding.
The family portal now contains everything you need when booking using your funding – you won’t have to spend time sending information through separately.
For existing TFC or CVS customers, it’s important to note that you will need to register your details with us to allow you to easily book your activities going forward.
What next?
If we’ve helped you discover more about help with childcare costs – great! We hope you don’t delay in unlocking this available funding.
However, you choose to use TFC or CVS, both schemes can bring you valuable savings, lightening the load of childcare costs.
If the before and after-school period is – or is set to be – tricky, why not look into whether your school offers wraparound childcare? Don’t forget, your childcare funding can be used for this service. Find out more about childcare.
