As we head into the summer holidays, it’s a good time for families to understand the financial support available to them through various government programmes. This blog provides a comprehensive overview of the main benefits available to parents in the UK, including Tax-Free Childcare, Free Childcare, and Child Benefit.
A recent study indicated that only 36% of eligible families are utilising tax-free childcare. The cost of childcare is rising, with the average cost of sending a child under two to a nursery for 25 hours per week (part-time) rising to £8,194 per year. Hopefully, this blog will provide more information on the various support options available.
Tax-Free Childcare
Tax-Free Childcare is a government initiative designed to assist working parents with childcare expenses. By setting up an online account through which payments to childcare providers are made directly, parents can benefit from a government top-up.
How It Works
For every £8 deposited into the account, the government adds a £2 top-up, effectively giving a 25% bonus. Parents can receive a maximum government top-up of £2,000 per child per year. Example uses include childminders, after-school clubs, and holiday clubs.
Eligibility Criteria
To qualify for Tax-Free Childcare, the following conditions must be met:
Child’s Age: The child must be under 12 years old, or under 17 if they have a disability.
Parental Employment: Both parents (or a single parent) must be working, earning at least £9,516 each and less than £100,000 annually.
Other Benefits: Parents must not be receiving support through Tax Credits or Universal Credit.
Reconfirmation: You must reconfirm your eligibility every three months.
Free Childcare
Free Childcare refers to government-funded childcare hours available to parents of young children. Since childcare is a devolved matter, the availability and specifics of free childcare schemes vary between England and Wales.
Wales
30 Hours Free Childcare for 3 and 4-Year-Olds: Up to 30 hours per week for working parents or those on statutory pay, for up to 48 weeks per year.
Flying Start Programme: 12.5 hours per week for eligible 2-year-olds during term time, available in some local authorities.
England
15 Hours Free Childcare for 3 and 4-Year-Olds: All 3 and 4-year-olds get 15 hours per week, increasing to 30 hours for working parents.
15 Hours Free Childcare for 2-Year-Olds: For working parents of 2-year-olds.
15 Hours Free Childcare for Children 9 Months to 2 Years: Starting September 2024.
Eligibility Criteria
Similar to Tax-Free Childcare Both parents (or a single parent) must be working, earning at least £9,516 each and less than £100,000 annually. You may also be eligible if you receive certain benefits.
Child Benefit
Child Benefit helps with the cost of raising children, paid monthly tax-free to most parents or guardians.
Types of Child Benefit
Eldest or Only Child: £25.60 per week.
Additional Children: £16.95 per week per child.
Eligibility Criteria
Age: For children under 16, or under 20 if in approved education or training.
Residency: The child must live with the parent or guardian, or the parent must contribute at least an equivalent amount.
High-Income Child Benefit Tax Charge
If either parent or guardian has an individual income of over £60,000 per year, they may be subject to the High-Income Child Benefit Tax Charge. This means they may have to pay back some or all of their Child Benefit in the form of additional income tax.
Income Between £60,000 and £80,000: Will need to pay back 1% of the family’s Child Benefit for every £200 of income over £60,000.
Income Over £80,000: Will have to pay back the entire amount of Child Benefit received.
We hope this guide helps you understand the benefits available. Please note that there may be limitations to the benefits provided, such as not all childcare providers being part of the schemes, childcare not being provided year-round, or additional costs being charged. For detailed information, please visit the government website.
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