Tax-Free Childcare doesn’t have anything to do with tax at all.
You set up an account with the government, save into it, and the government adds £20 (up to a maximum of £2,000 a year per child) for every £80 you save, if the money’s to be used on qualifying childcare costs. The tenuous link to tax is that the 20% top-up claimants receive happens to match the basic rate of income tax (and even that’s not true if you’re in Scotland!). It’s really just called “tax-free” so that governments can claim they’re collecting less in tax, which tends to play better with the public than the reality, which is that they’re paying out more in state benefits. But it does provide extra funds for some childcare costs for working households (that aren’t claiming Working Tax Credit, Child Tax Credit or Universal Credit) where nobody earns over £100,000. If that could be helpful to you, look into it:
https://www.gov.uk/tax-free-childcare
Most parents of 3 or 4 year old children also qualify for up to 30 hours of free childcare each week. Applying for that forms part of the same process (and still has nothing to do with tax!).
Comments