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Updated on 6 April 2024

How tax credits helps with childcare costs

The childcare element in working tax credit can provide support of up to 70% of eligible childcare costs. Tax credits are an annual benefit. They are based on a tax year which runs from 6 April to 5 April the following year. HM Revenue & Customs (HMRC) administer the tax credits system. Tax credits are gradually being replaced by universal credit.

How tax credit childcare support works

Each award of tax credits can only last for a maximum of one tax year, so you must renew your claim each year. Awards are initially based on your previous year income, and it is only after the tax year ends that HMRC finalise the award for the tax year just ended. You can find out more about this cycle in our tax credits section.

Working tax credit and child tax credit are made up of different elements. You qualify for the different elements based on your household circumstances. All of the elements you qualify for are added together to find a maximum amount which is then reduced (unless you receive certain social security benefits) if your income is above a certain amount.

Support with childcare costs is provided in working tax credit as a childcare element.

If you meet the qualifying conditions and have relevant childcare costs, you can include your childcare costs in your claim. This element is worth up to 70% of your childcare costs certain maximum amounts.

HMRC will then make you payments every four weeks (or weekly if you request). Normally working tax credit payments are made to the person working and child tax credit plus the childcare element of working tax credit is paid to the person with main responsibility for the child/children.

The maximum amounts

The childcare element in working tax credit is worth up to 70% of childcare costs within certain maximum amounts. Eligible childcare costs are the amount spent on qualifying childcare, up to a maximum of £175 a week for one child, and £300 for two or more children.

Therefore, the maximum support with one child in childcare is £175 x 70% = £122.50 a week, and £300 x 70% = £210 a week for two or more children. It is important to note that these thresholds are applied once average weekly childcare costs have been calculated (and added together if there is more than one child).

It is important to calculate your childcare costs accurately and keep a record of your calculations so that you can refer to them when you finalise your award at the end of the tax year and also if your childcare costs change during the year.

The amount of tax credits you get depends on your full household circumstances, such as how many children you have, how many hours you work, whether you qualify for any disability elements, your childcare costs and also your total household income. 

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