However, now that the summer holidays have arrived there may be some help at hand by way of Tax-Free Childcare.
That is because working parents who incur summer holiday childcare costs can use Tax-Free Childcare (TFC), which is worth up to £2,000 per child per year, to pay for regulated holiday clubs during the school holidays.
How does it work?
Launched in April 2017, Tax-Free Childcare means that for every £8 a parent pays in, the government will pay in an extra £2. So it effectively gives you basic-rate tax back on what you pay, hence the scheme’s name.
Parents can receive a maximum of 20% (£2,000) on childcare costs of up to £10,000 per child, per year. Higher limits apply for disabled children.
Do I qualify?
The scheme is available to all eligible workers including the self-employed.
Generally, to qualify, all parents in the household must generally meet a minimum income level; based on working 16 hours a week (on average £120 a week) and each earn less than £100,000 a year.
The scheme is available for children up to the age of 12, or 17 for children with disabilities. Parents will need to open an online account, which they can use to pay for childcare from a registered provider.
Parents are advised that it is possible to pay into their account regularly and ‘save up’ their Tax-Free Childcare allowance and use it for childcare during school holidays.
How do I apply for Tax-Free Childcare?
It takes approximately 20 minutes to apply and you will need to provide details including your:
• National Insurance number
• Unique Taxpayer Reference (UTR), if you’re self-employed
Applications can be made via the .gov website
Contact us to find out how we can help with tax-free childcare and wider tax planning opportunities here.