A parent has shared how they save more than £1,000 a year with tax-free childcare. Kiran wrote into the Money Saving Expert (MSE) site, founded by Martin Lewis, to urge others to make the move.
They wrote: "I had no idea about the tax-free childcare scheme until I received an email highlighting I could pay for after-school care through its website and save 20%. Thanks to Martin and his team, I now save around £100 a month. I am so grateful. Thank you." The savvy parent said she saved around £1,200 a year in total.
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According to MSE, tax-free childcare isn't right for everyone, and for most who are already getting help with childcare costs from the state, signing up to it will cause you to lose those benefits. People claiming Universal Credit or tax credits will likely get the most help sticking with those benefits to cover their childcare costs.
The government-backed tax-free childcare is a UK-wide scheme designed so that for every 80p you put into your tax-free childcare account, the state will add 20p. It essentially gives you basic-rate tax back on your bill, MSE states. Eligible parents can get up to £2,000 per child per year.
You may be eligible for up to £4,000 per child per year if your child is disabled. The scheme is available to parents with children aged 11 and younger, or to those with disabled children aged 16 and younger. If you're single, you qualify for the scheme if you work, including if you're self-employed. If you have a partner, you usually both need to be in work to qualify. But MSE listed some circumstances where you'd be eligible even if you are not working, including:
- You're on sick leave
- You're on annual leave
- You're on shared parental, maternity, paternity or adoption leave, and already have a Tax-Free Childcare account for another child
- You or your partner is in work and the other isn't able to work and receives certain benefits such as: incapacity benefit, carer's allowance or severe disability allowance.
To qualify, you - and your partner if you have one - will need to earn at least national minimum wage, but less than £100,000 a year. If you're self-employed, you'll qualify as long as you earn at least £152 a week on average over the next three months.
You can choose to spend the money on whatever childcare you wish as long as it is a registered provider with the scheme, or with a regulated body including Care Inspectorate Wales or Ofsted (England). It covers registered providers, such as:
- Breakfast clubs and after school clubs
- Childminders
- Nurseries
- Playgroups
- Nannies
- Au-pairs
If you're eligible, you'll need to create an online childcare account on the Government Tax-Free Childcare site. It should take about 20 minutes to set up, MSE said. You will need your national insurance number to hand - or your unique taxpayer reference if you're self-employed. To continue with the scheme over the year, you must reconfirm you're still eligible every three months.
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