Martin Lewis has warned that 800,000 families across the UK are missing out on the chance to get up to £2,000 a year to help pay for regulated childcare, which includes holiday clubs and other out-of-school activities.
The consumer champion explained how the Tax-Free Childcare scheme works on the latest edition of The Martin Lewis Money Show Live. He highlighted how the scheme provides eligible working families with up to £500 every three months, or £1,000 if their child is disabled, towards the cost of holiday clubs, before and after-school clubs, childminders and nurseries, and other approved childcare schemes.
For every 80p deposited into a Tax-Free Childcare online account, families will receive an additional 20p in UK Government top-ups, and it is available for children aged up to 11, or 17 if the child has a disability. Regarding eligibility for Tax-Free Childcare, Martin said: “To get this, you must be working an average of 16 hours or more per week - you can be self-employed - and if you’re a couple, you must both be working 16 hours or more.”
He continued: “You must earn at least the National Minimum Wage and the most an individual in the couple can earn is £100,000 per year.”
Martin also explained that the maximum amount you can add in to the account, which you can open on GOV.UK here, is £8,000 per year which means you would get a boost of £2,000 to help with childcare costs.
Across the UK, 512,415 families used Tax-Free Childcare in the 2021 to 2022 tax year, compared to 374,135 in the 2020 to 2021 tax year.
In a nutshell: How the scheme works
The scheme offers a 25% UK Government funded top-up on money deposited into Tax-Free Childcare accounts, which can be used to pay a registered childcare provider.
Accounts can be opened at any time of the year and can be used straight away. Money can be deposited at any time and used when needed.
For example, if parents and carers have school-aged children and use holiday clubs during school holidays, they could deposit money into their accounts throughout the year. This means they could spread the cost of childcare while also benefiting from the 25% top-up.
Any unused money that is deposited can be simply withdrawn at any time.
Pre-school children
Tax-Free Childcare is also available for pre-school aged children attending nurseries, childminders, or other childcare providers.
Families with younger children will often have higher childcare costs than families with older children, so the tax-free savings can really make a difference.
Childcare providers can also sign up for a childcare provider account via GOV.UK to receive payments from parents and carers via the scheme.
Find out more about Tax-Free Childcare on GOV.UK here.
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