Childcare! It is a subject that is never too far from the lips of working parents and according to our Tax Assistant Manager, Gemma Giles, the eligibility linked to tax-free and funded childcare is certainly not child’s play.
Here Gemma, a working mum herself, tells us more about tax-free childcare, the criteria, funded hours, eligibility and what it means if your income is above £100,000.
Is this for me?
If you have children and are using, or plan to use, either tax-free childcare or funded hours for working families, then this is certainly worth a few minutes of your time. This blog will help you to understand more about the criteria, so you can check your eligibility.
What is tax-free childcare?
If you’re a working parent or carer, you can get a £2 top-up for every £8 that you pay towards childcare; this is up until your child turns 11 years old, receiving up to £2,000 a year. Or, £4,000 a year up to your child turning 16 years old if your child is disabled.
You can use it to pay for childcare including:
• childminders, nurseries and nannies
• before and after school clubs
• holiday clubs
• specialist equipment for the childcare provider to use for your child, such as mobility aids
What are the funded hours for working families?
If you live and work in England you may be entitled to up to 30 hours of funded childcare support. This is valid over 38 weeks (school term time) of the year from the term after your child turns 9 months old until they start school.
Eligibility
To qualify for both, you AND your partner (if you have one), must:
• Be working or in receipt of a qualifying benefit
• Have average earnings of more than £847 per month (if you are 21 or over) each
In this case, only certain types of income count towards earnings. This includes employment income and income from self-employment or a partnership. The following types of income do not count towards your earnings:
• dividends
• interest
• rental income
• pension payments
So, if you and/or your partner are a company director who would usually take a salary of below £847 per month and then top up your income with dividends, you may want to reconsider, if you are currently claiming or intend to use a tax-free childcare account or claim the 15/30 hours funding for working parents.
If this sounds like you, please contact us to discuss this.
Please note, that there are different eligibility criteria for some other childcare funding options such as funding for all three and four-year-olds and universal credit support.
You may still be eligible if you or your partner is working, and the other gets any of the following:
• Incapacity Benefit
• Severe Disablement Allowance
• Carer’s Allowance or (in Scotland only) Carer Support Payment
• contribution-based Employment and Support Allowance
Income above £100,000
If you OR your partner (if you have one) have expected adjusted net income above £100,000 you will not be eligible.
Adjusted net income, however, does include all income including dividends, interest, rental income & pension payments.
It is also adjusted for any pension payments you make personally and several other adjustments.
If you think you may exceed this amount but are claiming any of these childcare benefits, please get in touch with us so we can discuss your options.