Childcare Accounts Can Subsidise Camp Costs

If you have children under 12 who attend a nursery, after school club, play scheme, childminder or you are considering sending them to a summer camp, you should think about setting up a tax-free childcare account. The government adds 25% to the amounts that you save in the account, contributing up to £2,000 for each child each year (a higher amount applies for disabled children). For example, if you save £8,000, this is topped up to £10,000.

The account is then used to pay approved childcare providers. It is worth noting that it doesn’t need to be the child’s parents paying into the account. Uncles, aunts, grandparents and others can also make payments, The government have noticed that many families who are eligible for this scheme are yet to set up their accounts.

Various factors affect eligibility but those with annual net income in excess of £100,000 are notably excluded.

The tax-free childcare account scheme will gradually replace childcare vouchers which many employers continue to provide to employees.

Childcare vouchers are free from tax and national insurance (within specified limits) and can be used to pay for childcare until the child is 16. Childcare voucher schemes can no longer be set up but employees already eligible can continue to benefit.

Poor Take-up of Tax Free Childcare Accounts

The government are concerned about the lack of take up of tax-free childcare accounts, with HMRC estimating that less than 22% of families eligible for the scheme had joined in March 2021. With many parents returning to work following the pandemic they should be encouraged to set up a tax free childcare account to help with their childcare costs. HMRC are suggesting that employers should make their employees aware of the support available to families with young children. With many parents working from home for part of the week tax free childcare accounts are more flexible than childcare vouchers.

Childcare vouchers continue to be available for employees who joined a qualifying scheme before 4 October 2018 and applies to children up to age 16.

Tax-free childcare is available for working families (including the self-employed) who are not receiving tax credits, universal credit or childcare vouchers. It can also be used at the same time as the 15 or 30 hours of free childcare in England. Key points:

• For working families, including the self-employed, in the UK
• Earning at least £142 per week (equal to 16 hours at the National Minimum or Living Wage) each
• Who aren't receiving Tax Credits, Universal Credit or childcare vouchers
• With children aged 0-11 (or 0-16 if disabled)
• For every £8 you pay into an online account, the government will add an extra £2, up to £2,000 per child per year

Note that the tax-free childcare scheme is not available if either partner expects to individually earn more than £100,000 a year.

For every £8 paid into an online account, the government adds an extra £2, up to £2,000 per child per year (£4,000 for disabled children). For example, for childcare costs of £500 per child per month, the family would pay £400 into their childcare account and the government would pay in £100 per child. This would be an annual saving of £1,200 per child.

The account can be used to pay for nursery fees, breakfast clubs, after school clubs, summer camps and OFSTED registered childminders.

For an overview of government childcare support see:

https://www.childcarechoices.gov.uk/

Back to school - Remind employees about HMRC support with childcare costs!

With children starting to go back to schools and nurseries in September, and more employees going back to work full time due to the withdrawal of CJRS support, they may need to start thinking about childcare. HMRC have issued a reminder that there is support available for families towards their childcare costs. If they haven’t already done so they should set up a “Tax-Free” Childcare Account to help pay towards the cost of childminders, breakfast and after school clubs, nursery fees and approved play schemes. For every £8 an eligible family pay into the special account the government adds £2, up to £2,000 a year, or up to £4,000 a year if a child is disabled.

The scheme is available to parents or carers who have children aged up to 11, or 17 if their child is disabled. Parents can get Tax-Free Childcare in addition to 30 hours free childcare if they are eligible for both. If the employee or their partner have an expected ‘adjusted net income’ over £100,000 in the current tax year they will not be eligible. This includes any bonuses they expect to get.

For more details see: HMRC can help with childcare costs as children head back to school: https://www.gov.uk/government/news/hmrc-can-help-with-childcare-costs-as-children-head-back-to-school

Tax Free Childcare Account Subsidises Summer Camp Costs

If you have children under 12 who attend a nursery, after school club, playscheme, childminder or you are considering sending them to a summer camp you should think about setting up a tax-free childcare account. The government adds 25% to the amounts that you save in the account up to £2,000 for each child so £8,000 is topped up to £10,000 (a higher amount applies for disabled children). The account is then used to pay Ofsted registered childcare providers.

Note that it doesn’t need to be the child’s parents paying into the account, uncles, aunts, grandparents and others can also make payments.

Note also that you are not eligible if you or your partner have adjusted net income in excess of £100,000 for the current tax year.

This scheme will gradually replace childcare vouchers which many employers continue to provide to employees. These are free from tax and national insurance (there are limits) and can be used to pay for childcare until the child is 16. Childcare voucher schemes can no longer be set up but employees already eligible can continue to benefit.