Employer Responsibilities

Tax free childcare

You can get up to £500 every 3 months (up to £2,000 a year) for each of your children to help with the costs of childcare. This goes up to £1,000 every 3 months if a child is disabled (up to £4,000 a year).

If you’ve already registered, you can sign in to your childcare account.

If you get Tax-Free Childcare, you’ll set up an online childcare account for your child. For every £8 you pay into this account, the government will pay in £2 to use to pay your provider.

You can get Tax-Free Childcare at the same time as 30 hours free childcare if you’re eligible for both.

What you can use Tax-Free Childcare for

You can use it to pay for approved childcare, for example:

  • childminders, nurseries and nannies
  • after school clubs and play schemes

Your childcare provider must be signed up to the scheme before you can pay them and benefit from Tax-Free Childcare.

Check with your provider to see if they’re signed up.

If your childcare provider is in an EEA country

You may be able to use Tax-Free Childcare to pay a provider based in a European Economic Area (EEA) country. Contact HM Revenue and Customs (HMRC) to check.

Eligibility

Your eligibility depends on:

  • if you are working
  • your income (and your partner’s income, if you have one)
  • your child’s age and circumstances
  • your immigration status

If you are working

You can usually get Tax-Free Childcare if you (and your partner, if you have one) are:

  • in work
  • on sick leave or annual leave
  • on shared parental, maternity, paternity or adoption leave

If you’re on adoption leave, you cannot apply for the child you’re on leave for unless you’re going back to work within 31 days of the date you first applied.

If your working pattern has changed because of coronavirus (COVID-19)

You may still be eligible for Tax-Free Childcare if you’re temporarily working less and either:

  • you’re on furlough through the Coronavirus Job Retention Scheme
  • you’re claiming a Self Employment Income Support Scheme grant

If you’re not currently working

You may still be eligible if your partner is working, and you get Incapacity Benefit, Severe Disablement Allowance, Carer’s Allowance or contribution-based Employment and Support Allowance.

You can apply if you’re starting or re-starting work within the next 31 days.

Your income

You’ll need to expect to earn a certain amount over the next 3 months. This is at least the National Minimum Wage or Living Wage for 16 hours a week on average.

For example, over the next 3 months you expect to earn at least £1,813.76 – the National Living Wage for people over 25.

If you have a partner, they’ll need to expect to earn at least this much too.

If you or your partner are temporarily earning less than this amount because of coronavirus, you may still be eligible. You must be furloughed through the Coronavirus Job Retention Scheme or claiming a Self Employment Income Support Scheme grant to qualify.

If you’re self-employed and do not expect to make enough profit in the next 3 months, you can use an average of how much you expect to make over the current tax year.

This earnings limit does not apply if you’re self-employed and started your business less than 12 months ago.

If you or your partner have an expected ‘adjusted net income’ over £100,000 in the current tax year you will not be eligible. This includes any bonuses you expect to get.

You or your partner can earn up to £150,000 in the current tax year and still be eligible if you’re a critical worker and have worked extra hours because of coronavirus.

Your adjusted net income is your total taxable income before any personal allowances and minus things like Gift Aid.

Your child

Your child must be 11 or under and usually live with you. They stop being eligible on 1 September after their 11th birthday.

Adopted children are eligible, but foster children are not.

If your child is disabled you may get up to £4,000 a year until they’re 17. They’re eligible for this if they:

Your immigration status

To be eligible for Tax-Free Childcare, you (or your partner if you have one) must have a National Insurance number and at least one of the following:

  • British or Irish citizenship
  • settled or pre-settled status, or been living in the UK before 1 January 2021 with the right to reside
  • permission to access public funds – your UK residence card will tell you if you cannot do this

If you’re living in an EU country, Switzerland, Norway, Iceland or Liechtenstein, you (or your partner if you have one) might still be eligible for Tax-Free Childcare if:

  • your work is in the UK
  • the work started before 1 January 2021
  • you’ve worked in the UK at least once every 12 months since you started working here

This is known as being a ‘frontier worker’.

If you get tax credits, Universal Credit, a childcare bursary or grant, or childcare vouchers

You cannot get Tax-Free Childcare at the same time as claiming Working Tax Credit, Child Tax Credit, Universal Credit or childcare vouchers.

Which scheme you’re better off with depends on your situation. Use the childcare calculator to work out which type of support is best for you.

Tax credits

If you successfully apply for Tax-Free Childcare, your Working Tax Credit or Child Tax Credit will stop straight away. You cannot apply for them again.

Childcare vouchers

You must tell your employer within 90 days of applying for Tax-Free Childcare to stop your childcare vouchers or directly contracted childcare. They’ll then stop giving you new vouchers or directly contracted childcare.

You will have to give HMRC evidence you‘ve left your employer’s childcare voucher scheme, for example:

  • a copy of the letter telling your employer you’re leaving the childcare voucher scheme
  • copies of your payslips showing your pay before and after you’ve left the scheme

Universal Credit

Wait until you get a decision on your Tax-Free Childcare application before cancelling your Universal Credit claim.

Bursaries

If you or your partner get a childcare bursary or grant or expect to do so within the next 3 months, you cannot get Tax-Free Childcare.

Apply

Apply online for Tax-Free Childcare

If you apply for Tax-Free Childcare and someone else already gets 30 hours free childcare for that child, their 30 hours will stop at the end of the next term. You will be eligible for 30 hours free childcare instead.

If you have a partner

You must include your partner in your application if you are:

  • married or in a civil partnership and live together
  • not married or in a civil partnership, but living together as though you are

Their employment and income will not affect your eligibility if they:

  • are or will be absent from your household for more than 6 months
  • are a prisoner

You and your partner cannot both have accounts for the same child.

If you are separated

You and your ex-partner need to decide who should apply if you are jointly responsible for your child.

If you cannot decide, both of you must apply separately and HMRC will decide who gets a childcare account.

 

Childcare vouchers and other employer schemes

The following schemes are closed to new applicants:

  • childcare vouchers
  • childcare your employer arranges with a provider (known as ‘directly contracted childcare’)

If you joined one of these schemes on or before 4 October 2018 you might be able to keep getting vouchers or directly contracted childcare.

If you joined a childcare voucher scheme or a directly contracted childcare scheme on or before 4 October 2018

You can keep getting vouchers or directly contracted childcare as long as:

  • your wages were adjusted on or before 4 October 2018
  • you stay with the same employer and they continue to run the scheme
  • you do not take an unpaid career break of longer than a year

You can take up to £55 a week of your wages, which you do not pay tax or National Insurance on.

How much you can take depends on the amount you earn and when you joined the scheme.

If the business you work for changes owner, your employee rights are usually protected. Check with your new employer if you can still get vouchers or directly contracted childcare.

If you get Tax-Free Childcare

You cannot continue to claim childcare vouchers or directly contracted childcare if you successfully apply for Tax-Free Childcare.

Which scheme you’re better off with depends on your situation. Use the childcare calculator to work out which type of support is best for you.

You must tell your employer within 90 days if you get Tax-Free Childcare. They’ll then stop giving you new vouchers or directly contracted childcare.

You can continue to use any vouchers you already have, including to make a joint payment for childcare with Tax-Free Childcare. There’s no deadline for using your vouchers or directly contracted childcare.

Once you’ve told your employer that you’re getting Tax-Free Childcare, you cannot rejoin their voucher scheme or their directly contracted childcare scheme.

Tax and employer childcare schemes

You do not have to pay tax and National Insurance on:

  • childcare vouchers, if you joined a scheme and your wages were adjusted on or before 4 October 2018
  • directly contracted childcare, if you joined a scheme and your wages were adjusted on or before 4 October 2018
  • workplace nurseries

You must pay tax and National Insurance on:

  • cash your employer gives you to pay for childcare
  • childcare provider’s fees your employer pays
  • school fees your employer pays

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