Tax-Free Childcare eligibility temporarily extended due to coronavirus

With the government set to takes us into Phase 2 of the recovery from Covid-19 there are signs that some optimism is returning to both the economy and society. However, there are many challenges still to overcome and the government is looking at all areas to help.

Historically, Tax-Free Childcare (TFC) has been a 20% tax-free bonus to help with childcare costs. Working parents can open a TFC account which is topped up by £2 for every £8 contributed, up to a maximum of £2,000 per child, per year. The money is then used to pay a registered childcare provider. Those earning over £100,000 or less than national minimum wage for 16 hours per week aren’t eligible for the scheme. Parents need to sign back in every three months and confirm their details are up to date, to keep getting government top-ups.

What is Tax-Free Childcare (TFC)? Well, it isn’t completely tax-free childcare, it’s a 20% tax-free bonus to help with childcare costs. Working parents can open a TFC account which is topped up by £2 for every £8 contributed, up to a maximum of £2,000 per child, per year. The money is then used to pay a registered childcare provider. Those earning over £100,000 or less than national minimum wage for 16 hours per week aren’t eligible for the scheme. Parents need to sign back in every three months and confirm their details are up to date, to keep getting government top-ups.

What’s changed?  Due to the coronavirus pandemic, lots of people are facing a reduction in their incomes. Critical workers, on the other hand, may have a higher income this year if they are working more hours due to increased demand or perhaps their colleagues have been taken ill. This means that many people could miss out on TFC when they need it most.

What is the government doing about it? To address this issue, the government has announced that those who are below the normal minimum earnings requirement but would normally expect to earn above it can still access this scheme. Parents that would usually meet the criteria but are having to take time off due to illness, to self-isolate or to care for someone else are also eligible. In addition, critical workers who will have exceeded the maximum income threshold of £100,000 per year because of increased hours as a direct result of coronavirus, are still eligible for 30 hours and TFC for the current tax year.

You can check eligibility and apply here

If you would like to discuss your eligibility and how this may affect you contact us.