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Tax-free childcare can ease summer costs

Written by: Emma Lunn
Working parents could be entitled to tax-free childcare worth up to £2,000 per child per year to pay towards holiday clubs.

HMRC has reminded parents that money saved into a tax-free childcare account can be used to pay towards regulated holiday clubs during the school holidays.

If parents pay into their tax-free childcare account regularly, they can save up their money and use it for childcare during school holidays. For every £8 families pay in, the government will make a top-up payment of £2.

The money saved can be put towards a whole range of other childcare options, including school and summer camps across the country, and before and after school care when term time starts again in September.

The scheme is open to working parents, including the self-employed, who earn between the minimum wage and £100,000 per year and have children aged up to 11-years-old.

Liz Truss, chief secretary to the Treasury, said: “We understand making arrangements for summer childcare at this time of year is important and can be a stressful time for parents.

“Tax-free childcare makes things easier, putting more money in the pockets of parents and supporting as many families as possible to secure high-quality, affordable childcare.

“Parents should visit the Childcare Choices website and take advantage of the range of offers to help balance their work and family lives while saving money.”

You can find out more and apply through the Childcare Choices website. It includes a childcare calculator which compares all the government’s childcare offers to check what works best for individual families.

How tax-free childcare works

Working parents can apply, through the childcare service, to open an online childcare account. The scheme is available for children under the age of 12, or under the age of 17 for children with disabilities.

If you or your partner has an ‘adjusted net income’ of more than £100,000 in the current tax year, you will not be eligible.

For every £8 that families pay in, the government will make a top-up payment of an additional £2, up to a maximum of £2,000 per child per year (or £4,000 for disabled children).

This top-up is added instantly and parents can then send payments directly to their childcare providers. The maximum government top-up is £500 per quarter for each child, or £1,000 if the child is disabled.

All registered childcare providers – including nannies, nurseries, childminders or after-school clubs – can sign up online to receive parents’ payments through tax-free childcare.

Parents need to sign back in every three months and confirm their details are up-to-date, to keep getting government top-ups.

Earlier this month Hargreaves Lansdown calculated that parents are set to spend a collective £2bn on summer childcare.

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