Tax-free childcare: who is it for?
Tax-free childcare provides a Government contribution to help with the costs of childcare for working families in England, Scotland, Wales and Northern Ireland who meet certain minimum and maximum earnings rules. You can only use the help through tax-free childcare if the main reason for the childcare is to enable you to work.
Eligibility rules for tax-free childcare
To access tax-free childcare, you (and your partner) will need to be in the UK and meet a minimum earnings requirement from paid work, which is equivalent to earning 16 hours work per week paid at your relevant national minimum wage rate for the number of weeks in the entitlement period. This will mean you will each need to expect to earn at least £2,643.68 over the three-month entitlement period if you are aged 21 or over. This is an average of £203.36 a week. This does not mean you have to earn that amount every week, as long as you expect to do so on average over the three-month period. If you are on a zero-hours contract, you may earn far more than this in one week and then not work the following week, but as long as you expect to earn at least £2,643.68 over the three-month entitlement period then you can qualify.
You can use the scheme whether you are employed or self-employed as long as you meet this earnings level. If you are self-employed you will be exempt from meeting this earnings level in your first 12 months of self-employment and some self-employed claimants will be able to average their earnings over a 12-month period when working out if they meet the minimum earnings level.
If you are part of a couple where one of you is in qualifying paid work and your partner is unable to work then you may still be entitled.
This exception should apply if your partner is paid or entitled to:
- Incapacity benefit
- Severe disablement allowance
- Carer’s allowance
- Contributory employment and support allowance
- National insurance credits on the grounds of incapacity for work or limited capacity for work
Treated as being in qualifying paid work
During periods of sickness and other statutory leave, you can be treated as in qualifying paid work and as having income equal to the earnings threshold, providing you were in qualifying paid work and earning at least that level immediately before the period of absence. This applies while you are:
- Paid statutory sick pay
- Paid maternity allowance
- Paid statutory maternity pay
- On ordinary or additional maternity leave
- Paid statutory paternity pay
- Paid statutory adoption pay
- On ordinary or additional adoption leave
- On shared paternal leave
- On statutory parental bereavement leave
- Paid statutory parental bereavement pay
- on statutory neonatal care leave (England, Scotland and Wales only)
- Paid statutory neonatal care pay
If you or your partner are claiming tax-free childcare in respect of a child whose birth or adoption cause the period of statutory leave, you will only be treated as in qualifying paid work for the last 31 days before your return to work but you will be treated as in paid work for the whole period of your statutory leave in respect of any other children for whom you are already claiming tax-free childcare.
If you are self-employed you are also treated as in qualifying paid work during these periods if any of these bullet points would have applied but for the fact that you are self-employed immediately before the period of leave rather than employed.
You cannot claim tax-free childcare if either of you expect to have adjusted net income of over £100,000 a year.
