When looking into childcare options for RLT, I noticed that childcare vouchers were soon to be unavailable to new applicants (October 2018). As I was already pregnant with our second child, I decided to head straight to opening a tax-free childcare account, so that I would only have to manage my childcare payments in one place further down the line.
What is tax-free childcare?
Tax free childcare is a system available in the UK where the government will give you £2 for every £8 you spend on childcare via a tax-free childcare account if you are earning (typically this is looking ahead to the next three months and you’d expect to earn at least £1,707.68 – the National Living Wage for people over 25, to qualify).
As my partner and I both work full-time, but we earn under £100,000 each, we qualify for this.
This is how I have found using the tax free childcare account system:
Simple to set up
The process was all completely online and I managed to do it in less than the twenty minutes specified, I just needed a few simple details about my national insurance number, employer and likewise for my partner.
You can only have one account for your child
If more than one person pays for childcare, you would need to use the one account, which only one parent can apply for. There is a sort code and account number you can provide for other people to add money to the account, there is also the option to make a card payment when you log in.
Logging in can be a bit of a pain
Every time I log into the government portal, it sends me a text message and I can’t proceed any further until I add in the code, it says that this code is valid for 7 days, but every time I log in, I get another code. It sometimes provides an error message too when I sign in, the government portals can definitely be more user-friendly, but they’re secure and during office hours they’re very good at responding to issues on twitter.
It takes a few days for the money to hit the account of your childcare provider
I have been able to automate my payments, so I have a standing order that leaves my bank account, hits my tax-free childcare account, gets topped up and then goes back out to my childcare provider (who has to be set up to take tax-free childcare, our nursery found the process of getting set up difficult and slow because they weren’t sent letters with codes on that were promised, this lost me around £180 in top-ups!). The process of my standing order hitting my tax-free childcare account tends to take 48 hours, it is topped up automatically and tends to take about four working days to get to our nursery when my balance is showing that the payment has been made. So please make your payments in advance of your nursery invoice due dates to be sure.
You will have to reconfirm your financial situation every three months
You will be prompted to log in and confirm your financial situation to ensure that you are still entitled to tax-free childcare. If you fail to reconfirm your entitlement will be stopped.
You can still benefit from tax-free childcare when you are on maternity leave
This was a big welcome surprise in our house! When you are reconfirming your eligibility it asks if you are earning a minimum amount per week. If like me, you’re on 12 months maternity leave and you don’t earn anything between months 9 and 12, you may think that you will not be eligible, but you are! As long as you’re on maternity leave you will get tax-free childcare (but not for the child you are on maternity leave for, which makes sense, really!)
If you have a tax-free childcare account they will automatically contact you when you are entitled to 30 hours free childcare
When I reconfirmed my situation for the last time before my child turned three years old, I had a message which advised me of his code for 30 hours free childcare and when we would be eligible to use it. I found it to be so easy and much more straightforward than I anticipated.
You can still use tax-free childcare even when using 30 hours free
If your childcare hours exceed 30 hours, you are still able to use your tax-free childcare account and top-up as required.
How much you can top-up by is capped
You can get up to £500 every 3 months (£2,000 a year) for each child. If your childcare bill is heavier in some months more than others, for instance, if your child is term-time only. You may want to be mindful of using your top-up allowance each month so that you don’t exceed the limits in some months and not use them at all in others.