Use Tax Credits

The Childcare Element of Working Tax Credit is currently available to single parents who work 16 or more hours a week and couples who both work at least 16 hours a week, providing the annual household income is under £41,000.

The Childcare Element of Working Tax Credit is not the same as child tax credit, which is often paid to the unemployed. The Childcare Element of Working Tax Credit is designed to help working parents pay for childcare and is only available to those who are working.

The average payment for the childcare Element of Working Tax Credit is around £60 per week. That works out as over £3000 a year.

The tax credit system is complicated and it is worth finding out if you are entitled to help with childcare through tax credits, even if you do have a household income of above £41,000. You may be entitled to a payout in this case if you have more than one child or if you have a disabled child. There may also be different criteria if you or your partner are disabled.

The Childcare Element of Working Tax Credits can be used for childcare for dependent children up to the age of 20, providing they are in full time education

Use Free Childcare for 3 and 4 Year Olds

In England 3 and 4 year olds are currently entitled to free early education for 38 weeks of the year. A child becomes eligible on 1st January, 1st April or 1st September following their third birthday. The early education can take place at any OFSTED registered setting. This could be a day nursery, school, child minder or SureStart centre.

Many settings allow you to use your free childcare entitlement for the first 15 hours of childcare and pay for any further hours separately.

Free Early Education entitlement is not the same in Scotland, Wales and Northern Ireland and you are advised to contact your nearest family information service regarding provision in these areas.

Some 2 year olds in England are also entitled to free Early Education classes; this may be the case if you are a low income family or if your child has additional needs.

Use Child Care Vouchers

Childcare vouchers can currently be used for children up to 15 years of age. They are offered by some employers and enable working parents to pay for childcare out of their income before tax and National Insurance.

There are slightly different ways child care voucher schemes operate but in general they work by allowing an employee to receive part of their salary as childcare vouchers. This means parents save because they don’t pay tax or national insurance on the vouchers. £1000 salary could be worth roughly £700 after tax and NI, so by receiving £1000 worth of childcare vouchers a parent saves roughly £300.

One or both parents are allowed to take a maximum of £243 per month in vouchers.

Childcare vouchers can affect how much Tax Credits you can claim. It is worth working out whether you would be better off claiming the Childcare Element of Working Tax Credit rather than using vouchers. You can do this on the Government’s HMRC vouchers vs. credits calculator, available at https://www.gov.uk/childcare-vouchers-better-off-calculator

Use Free Holiday classes and activities

Many council’s, community groups, schools and youth groups offer free or cheap activities for children over the school holidays.

If there is a fee to pay for these activities, as long as the provider is ofsted registered, payment can be subsidised through tax credits or childcare vouchers.

Best Wishes

TaxBanana.com