HMRC message for parents to save up to £2K a year | Personal Finance | Finance
A reminder has been issued to working parents to explore potential savings of up to £2,000 on childcare expenses for the upcoming financial year. HM Revenue and Customs (HMRC) says that numerous parents might be overlooking the opportunity to claim tax-free childcare benefits, which could translate to £2,000 in annual savings per child, or £4,000 for children with disabilities.
This initiative can help alleviate the financial burden of approved childcare costs for children aged 11 or under, or up to 16 if the child has a disability. Eligible parents can receive quarterly payments of up to £500 (or £1,000 for children with disabilities), with the UK Government contributing an additional £2 for every £8 deposited into their online account.
The application process for a Tax-Free Childcare account is swift, taking only 20 minutes to complete online, and can be utilised to cover various childcare expenses, including nursery fees, childminders, breakfast or after-school clubs, and holiday activity clubs.
In a recent post on X, HMRC advised: “Are you missing out on childcare savings? Check out our Tax-Free Childcare scheme and sign up today to unlock savings of up to £2,000 a year per child on approved childcare costs, including wraparound childcare.”
Upon opening an account, parents can immediately deposit funds, ensuring they are readily available when needed. Any unused balance in the account can be withdrawn at any time.
Eligibility criteria for the scheme
Families may be eligible for Tax-Free Childcare if they:
- Do not receive Tax Credits, Universal Credit or childcare vouchers
- Each earn no more than £100,000 per annum
- Have a child or children aged 11 or under. They stop being eligible on September 1 after their 11th birthday. If their child has a disability, they may get up to £4,000 a year until September 1 after their 16th birthday
- Earn, or expect to earn, at least the National Minimum Wage or Living Wage for 16 hours a week, on average
How to apply
To apply for Tax-Free Childcare, you can do so online. If you are married or in a civil partnership and living together, or not married or in a civil partnership but cohabiting as though you are, your partner must be included in your application.
You will need your National Insurance number, Unique Taxpayer Reference if you are self-employed, the UK birth certificate reference number for any children you are applying for, and the date you started or are due to start work.
Special rules apply if you’re registered as a director with HMRC. You will need to provide evidence that you meet the minimum income requirements that prove you are eligible for the scheme, which can be done through PAYE records.
If you do not submit regular PAYE information, you may need to provide additional evidence showing that you are working and expect to meet the minimum income requirements for the next three months.
You may need to provide a statement from your accountant, copies of invoices, wage slips, and bank statements. Furthermore, year-end payroll, a letter from your tax agent or adviser confirming your salary has been paid and taxed, and annual wage slips might be required.
Complete details on how to apply can be found here.