Save, make, understand money

Household Bills

Parents suffering coronavirus wage cuts may not qualify for 30 hours free childcare

Paloma Kubiak
Written By:
Paloma Kubiak

Parents who benefit from 30 hours free childcare may no longer be eligible for the scheme if they experience a fall in income as a result of the coronavirus crisis.

Update 5 May: The government has today announced that parents who’ve suffered job losses or wage cuts taking them below the minimum threshold for the 30 Hours free childcare scheme will still be eligible. See YourMoney.com’s Parents will be eligible for 30 hours free childcare if income falls below threshold for the full information.

All three and four-year-old’s in England are entitled to 15 hours free childcare a week.

However, to qualify for 30 hours, each parent must work and earn a weekly minimum of the equivalent of 16 hours at national minimum wage or living wage (£139 per week), and less than £100,000 a year. This includes self-employed parents.

Thousands of parents may no longer meet the minimum income threshold as a result of coronavirus-related wage cuts and job losses.

Latest statistics from the Department for Education (covering the summer 2019 term) reveal an estimated 378,774 children were in a 30 hours childcare place.

Parents must reconfirm their eligibility for the 30 hours scheme each quarter. If they don’t meet the criteria they won’t be able to benefit from the government funding once nurseries, playgroups, children’s centres, schools and clubs fully re-open after lockdown.

Fortunately, there is a grace period for parents in this situation. A child who becomes ineligible during the first half of a funding block should be funded until the end of that funding block and a child who becomes ineligible in the latter half of the funding block should be funded until the end of the following funding block.

After the grace period, however, the funding will stop.

YourMoney.com understands the Department for Education (DfE) is looking into measures to help parents who may have suffered financially as a result of coronavirus continue to receive 30 hours free childcare.

However, at this stage, it’s not clear whether income from being furloughed, or from the Self-employment Income Support Scheme when launched, counts towards making the minimum income test for 30 hours childcare.

A DfE spokesperson, said: “We are aware that the Covid-19 pandemic has had an impact on working hours for some parents. The Department for Education understands that parents will need to be updated on any changes to 30 hours eligibility and we are working to provide this information as quickly as possible.”

What about Tax-Free Childcare?

In more positive news, parents who suffer a loss of income due to the coronavirus pandemic will still be eligible for Tax-Free Childcare, HMRC has confirmed.

This government-funded scheme has the same income requirements as 30 hours free childcare: it’s available for working families, earning under £100,000 and at least £139 per week (it’s slightly different for the self-employed – see below).

Income from being furloughed, or from the Self-employment Income Support Scheme when launched, counts towards making the minimum income test for Tax-Free Childcare.

Parents who would usually meet the minimum income threshold but are suffering financially as a result of coronavirus can treat themselves as eligible. This includes parents who have been furloughed and whose new income – 80% of their salary – pushes them below the limit.

The only exception is if you’ve recently started claiming Universal Credit. You can’t get Tax-Free Childcare at the same time as claiming Working Tax Credit, Child Tax Credit, Universal Credit or childcare vouchers.

If you’re self-employed and don’t expect to make enough profit in the next three months, you can use an average of how much you expect to make over the current tax year when you come to re-confirm your details.

The earnings limit doesn’t apply if you’re self-employed and started your business less than 12 months ago.

Tax-Free Childcare helps families with children aged 0-11 (or up to 16 if disabled) with the cost of childcare. For every £8 you pay into a dedicated online account, the government adds an extra £2. This means you could get an extra £2,000 per child per year (£4,000 for disabled children).

Latest statistics from HM Revenue & Customs (HMRC), which administers the scheme, reveal 205,000 families used Tax-Free Childcare for 243,000 children in December 2019. This includes 29,000 families with a self-employed parent using a Tax-Free Childcare account.

The government spent £21.8m on top-ups for these families in the same month. It confirmed parents can still use these accounts in the usual way during lockdown and it is still topping up amounts.

‘Discrepancy should be addressed as soon as possible’

Neil Leitch, chief executive of the Early Years Alliance, said: “We welcome confirmation that parents who no longer meet the minimum income requirements for Tax-Free Childcare due to the impact of coronavirus can continue to claim this support during this difficult time. At a time of such financial difficulty, this will provide at least some reassurance for those parents who have seen their income fall, including those who have been furloughed.

“It is concerning, therefore, that it remains unclear whether or not this approach will be extended to the 30 hours funded childcare scheme. Given that the eligibility criteria for both schemes is broadly the same, it makes no sense to apply this flexibility to one but not the other.

“We urge the Department for Education to address this discrepancy as soon as possible. The government must do all it can to ensure that those families who remain eligible for childcare are given the financial support they need to be able to continue accessing it during this period.”