As children head back to school, now is the perfect time to consider the Government’s Tax-Free Childcare Account. This scheme offers parents a 25% top-up on childcare costs, which can be used for everything from nursery fees to after-school clubs and registered childminders. If you’re looking for a way to ease the financial burden of childcare, setting up a Tax-Free Childcare Account could be the solution.
How Does the Tax-Free Childcare Account Work?
The scheme allows parents to save up to £8,000 per child annually, with the Government adding an extra 25% on top—equating to £2,000 of additional childcare funds. For disabled children, the savings limit is increased to £16,000, with the Government adding up to £4,000, making a total of £20,000 to use towards childcare.
Who Can Set Up a Tax-Free Childcare Account?
The scheme is available to both employees and self-employed individuals, unlike the traditional childcare voucher scheme offered by some employers. To qualify, parents need to be working and earning at least the National Minimum Wage or National Living Wage for an average of 16 hours per week. However, if either parent’s income exceeds £100,000 a year, they are not eligible.
Childcare Vouchers vs. Tax-Free Childcare
If your employer offers a Childcare Voucher Scheme, you cannot use both this and a Tax-Free Childcare Account. While the voucher scheme applies to children up to 16 years old, the tax-free childcare account only applies to children up to 12. It’s important to assess whether switching to a Tax-Free Childcare Account would be more beneficial for your family.
If you’re unsure about which scheme is best for you, contact A&C Chartered Accountants for expert advice. We’ll help you navigate your options and make the most of your childcare benefits.
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