The Government's Tax-Free Childcare scheme offers working families up to £2,000 per year per child, yet 300,000 eligible households are not claiming it, according to Martin Lewis' MoneySavingExpert (MSE).
How the scheme works
For every £8 deposited into a Tax-Free Childcare account, the Government adds £5. The maximum top-up is £500 every three months per child under 11, totalling £2,000 annually. For disabled children, the top-up rises to £1,000 every three months, up to £4,000 per year.
Eligibility criteria
To qualify, parents must be at least 16, in paid employment, and have an expected adjusted net income below £100,000. Over three months, each parent must earn at least £2,643.68 if aged 21 or over, £2,256.80 if aged 18-20, or £1,664 if under 18 or an apprentice. Self-employed individuals trading for less than 12 months may earn less.
Parents receiving Working Tax Credit, Child Tax Credit, Universal Credit, or Childcare Vouchers cannot use Tax-Free Childcare simultaneously. However, those not in work may qualify if their partner is employed and they receive certain benefits like Incapacity Benefit, Severe Disablement Allowance, or Carer's Allowance.
Why families miss out
MSE highlighted the issue in its money tips email, stating: "300,000 homes miss out on up to £2,000/yr via the 'Working Family Childcare Top-up' scheme. You won't have heard of this, because we made the name up. It's what we campaign for the formally titled 'Tax-Free Childcare' scheme to be called, as its real name is misleading and confusing."
MSE added: "If you're eligible and your childcare provider takes payments from Tax-Free-Childcare (ask it), it's a no-brainer."
How to apply
Applications are available online through the Childcare Choices website. Tax-Free Childcare can be claimed alongside the 30 hours for working parents scheme. The scheme covers children until 1 September following their 11th birthday, or until 1 September following their 16th birthday if disabled.
