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How to get £2,000 towards childcare costs

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Written by: Emma Lunn
26/01/2022
Families can receive a government top-up worth up to £2,000 a year towards the cost of childcare by signing up to Tax-Free Childcare.

But the government has warned that thousands of working families in the UK could be missing out on an opportunity to get the cash which could help them cover childcare costs during the February half-term.

Tax-Free Childcare – the 20% childcare top-up – provides eligible working families with up to £500 (or £1,000 if their child is disabled) every three months towards the cost of holiday clubs, before and after-school clubs, childminders and nurseries, and other accredited childcare schemes.

Nearly 316,000 working families used Tax-Free Childcare across the UK in September 2021, receiving a share of £35m in government top-up payments towards their childcare costs. This is an increase of about 90,000 families compared to September 2020.

Tax-Free Childcare is available for children aged up to 11, or 17 if the child has a disability. For every £8 deposited into an account, families will receive an additional £2 in government top-up.

Myrtle Lloyd, HMRC’s director general for customer services, said: “The 20% government top-up offers working families help to pay for childcare, whether it’s nursery bills, after school clubs or holiday clubs. Search ‘Tax-Free Childcare’ on GOV.UK to find out more.”

By depositing money into their accounts, families can benefit from the 20% top-up and use the money to pay for childcare costs when they need it. Accounts can be opened at any time of the year and can be used straight away.

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 benefitting from the 20% government top-up.

Tax-Free Childcare is also available for pre-school aged children attending nurseries, childminders, or other childcare providers.

Myron Jobson, personal finance campaigner at Interactive Investor, said: “The Tax-Free Childcare scheme is a great money saver for eligible parents, effectively offering 20% off childcare up to £2,000 a year. But a large proportion of parents are still unaware of its existence. And with the rising cost of living squeezing household budgets to breaking point, the need for help with childcare costs has become acute for many parents. 

“The return of costs associated with working from the office such a commuting and childcare costs exacerbates matters for the scores who have transitioned from working from home in recent weeks. The uptake of the scheme continues to fall far below original estimates which is largely due to underpromotion of the initiative. Greater promotion of the initiative is still needed to raise awareness while encouraging even more parents to apply.”

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