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Tax-free childcare - don't miss out!

Newsletter issue - July 2019

HMRC are currently running a campaign to remind people that they could get up to £2,000 per child, per year, towards childcare costs.

Broadly, eligible parents/guardians may receive government top-ups of £2 for every £8 that they pay into a tax-free childcare account, up to a maximum of £2,000 per child (or £4,000 for disabled children). There is an overall maximum limit of £10,000. The scheme is open to all working parents across the UK with children under 12, or under 17 if disabled.

Under the scheme, the parent/guardian opens an online account and decides how much to pay in. Circumstances are re-confirmed online every three months. Anyone can pay into the account, including grandparents, other family members or employers, giving flexibility to pay in more in some months, and less at other times.

Money can be withdrawn at any time but in doing so, the government contribution will be lost.

To qualify for the government contribution, account holders will usually have to be in work, expecting to earn at least the National Minimum Wage (NMW) or Living Wage (LW) for 16 hours a week on average, over the next 3 months.

Self-employed people who do not expect to make enough profit in the next 3 months can use an average of how much they expect to make over the current tax year. Additionally, the earnings limit does not apply to self-employed individuals who started their business less than 12 months ago.

Unlike the previous childcare scheme, tax-free childcare does not rely on employers offering it. Any working family can use a tax-free childcare account, provided they meet the eligibility requirements.

The Childcare Choices website includes a childcare calculator for parents to compare all the government's childcare offers and check what works best for their families, including the 30-hour free childcare offer, tax-free childcare or universal credit.

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