Parents have the opportunity to benefit from tax-free childcare amounting to up to £2,000 per year, which can be utilized during the summer break. Tax-free childcare entails an online account where the government matches every £8 deposited with an additional £2, strictly dedicated to childcare expenses.
Eligible individuals can receive a maximum of £500 every three months per child, totaling £2,000 annually, while parents of disabled children can claim up to £1,000 every three months, equating to £4,000 yearly. Setting up a tax-free childcare account is free, and the application process on the GOV.UK website typically takes about 20 minutes. Children must be 11 years old or younger, residing with the parent to qualify for tax-free childcare benefits.
The account can be operational until September 1 following the child’s 11th birthday, or for disabled children, it may extend until September 1 after their 16th birthday. To be eligible for a tax-free childcare account, individuals must earn a minimum wage equivalent for at least 16 hours weekly and have an adjusted net income below £100,000 for themselves and their partner if applicable.
There are exceptions where individuals can claim tax-free childcare even without being employed, such as during sick leave, annual leave, shared parental, maternity, paternity, or adoption leave. Additionally, if one partner is working while the other receives specific benefits like Incapacity Benefit or Carer’s Allowance, tax-free childcare can still be claimed.
Funds from the tax-free childcare account must be used with registered childcare providers like nurseries, nannies, and after-school clubs. Notably, parents may be entitled to 15 or 30 hours of free childcare weekly based on their child’s age, with working parents of nine-month-olds and two-year-olds currently eligible for 15 hours, increasing to 30 hours by September 2025.
All parents of three and four-year-olds receive 15 hours of free childcare per week by default, with working parents meeting certain criteria eligible for the full 30 hours. In addition, Universal Credit claimants who are employed can recover up to 85% of childcare expenses, capped at £1,031.88 for one child or £1,768.94 for two or more children.