Working tax credit: how to claim the childcare element
The childcare element is part of working tax credit. This means you will need to qualify for working tax credits to get this support towards your childcare costs.
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Claiming the childcare element
If you are already claiming working tax credit, you should contact HMRC to ask for childcare to be added to your award. You can phone HMRC’s tax credit helpline or contact HMRC via the tax credits online service on GOV.UK, or write to them and ask for childcare to be added to your claim. You do not need to make a brand new tax credit claim.
If you are not already claiming tax credits, it is unlikely that you will be able to get help with your childcare costs through tax credits. This is because universal credit is gradually replacing tax credits and some other benefits. As a result, HMRC state that it is no longer possible to make a brand new claim for tax credits. You will need to claim universal credit or pension credit instead, depending on your age.
When you tell HMRC that you want childcare including in your tax credits award, you will need to include the following childcare information:
- Name, address and phone number of childcare provider
- Providers registration or approval number
- How many hours the child/children attend each provider
- The name of the Local Authority or body who approved your childcare provider (such as OFSTED)
- Your average weekly childcare costs (see below for information on how to calculate this)
It is important to only include costs that are qualifying childcare costs, that you actually incur and pay for and are for childcare that actually takes place. If your child does not attend childcare provision when you would usually expect them to, for example because they are ill, HMRC say you cannot claim for childcare costs for childcare if it does not take place after a period of 4 weeks, although you can re-start claiming for childcare costs once the childcare takes place again. This rule does not apply where childcare costs are variable and averaged over the year to accommodate periods where no childcare takes place. If you are in this situation, you should contact HMRC.
Childcare paid for by your employer and childcare covered by the free childcare offers cannot be included. You must also deduct any childcare vouchers you receive before calculating your average weekly costs, even if you pay for them via a salary sacrifice arrangement (however, if you do this, the income figure you declare for tax credits will be lower than it was before the sacrifice (subject to the £2,500 disregard for falls in income)). See our interaction section to understand more about choosing between tax credits and childcare vouchers.
Working out childcare costs for tax credits
You will need to tell HMRC your average weekly childcare costs.
HMRC produce a leaflet WTC 5 which explains how to calculate costs. You should read this carefully and make a note of how you calculated your costs.
How you calculate your costs depends on if your costs are Fixed (meaning you pay the same amount each week) or Variable (you pay different amounts each week or at different times of the year).
If you pay your childcare weekly – add up what was paid for the last 4 weeks and divide the result by 4.
If you pay your childcare monthly – multiply the monthly amount by 12 and divide the result by 52.
Variable weekly costs
This often applies where you pay more in the summer holidays than during term time.
Add up the total paid for the last 52 weeks and divide the result by 52.
If no childcare has been paid for the last 52 weeks then you can use any method that HMRC think is reasonable. This is normally done by totalling your estimated costs for the next 52 weeks and dividing the total by 52 to give an average weekly figure. If you do this, you should check this figure at regular intervals throughout the year especially if things over the next year may change.
Where you have entered into an agreement for childcare, WTC 5 recommends that you ask your provider for a written estimate and use that to work out the average.
Variable monthly costs
Take the charges for the previous 12 months, add them together and divide by 52.
If no childcare has been paid for the last 12 months then you can use any method that HMRC think is reasonable. This is normally done by totalling estimated costs for the next 12 months and then dividing the total by 52 to give an average weekly cost.
If you do this, you should check this figure at regular intervals throughout the year especially if things over the next year may change.
If you have to pay for childcare costs to cover short, fixed periods you can choose to average over that particular period rather than a whole year. This might happen where you only need childcare for the summer holidays.
This was introduced to make it easier for claimants to budget and meet their extra costs in the holidays.
To use this method you must tell HMRC:
- the start and end date of childcare
- the actual costs for the short period
- the childcare provider’s details
If you wish to use this method, you should contact HMRC for advice before filling in your claim form.
You are free to choose which method of the two methods to use.
If your childcare costs change
The childcare element of tax credits is complicated and working out your costs can be difficult if they change frequently. That means that knowing whether there has been a change of circumstances relating to childcare is not easy.
There is a change of circumstances for childcare costs if:
- Your average weekly childcare costs change by £10 a week or more (either up or down)
- Your costs reduce to nil or childcare stops
- Your childcare stops being qualifying childcare
You must report changes within one month.
If you have variable childcare costs – you will need to work out your expected costs for each child over the next 52 weeks and divide that total by 52 to get a new average weekly cost and compare that to the current cost used on your claim.
If you have fixed weekly childcare costs – you will need to work out your weekly costs, and if the figure is different to what you have been claiming by more than £10 a week for 4 weeks in a row, then there is a change to report to HMRC.
You should use the HMRC calculator (linked to below) to help you work out if there has been a change of costs. Failing to report any changes could mean you are overpaid or underpaid tax credits.
Getting help calculating your childcare costs
HMRC publish a very helpful guide called WTC 5 which explains how to calculate childcare costs and includes some helpful examples.
HMRC have also published a calculator to help claimants calculate their childcare costs for new claims and changes of circumstances.
The calculator is on GOV.UK.
We recommend that you print a copy of the results page and keep it safe in case your claim is checked at a later date by HMRC.