Press Release: Parents urged to be cautious before applying for Tax-Free Childcare

Published on 14 February 2018

The LITRG is urging parents and carers to check their position before applying for the new Tax-Free Childcare (TFC) as they may find other benefits they currently receive are stopped or that other childcare schemes can offer more financial support than TFC.

The roll-out of Tax-Free Childcare (TFC) is now complete. Although many will benefit from the scheme, it does add a further layer of complexity to the already complicated childcare landscape, says LITRG.

Chair of LITRG Anne Fairpo said:

“We are fully supportive of the help provided by the TFC scheme to working parents looking for reliable, high quality, affordable childcare but when set alongside existing childcare offerings, the childcare landscape that results is incredibly complex for very many people.

“If an existing tax credit claimant makes a claim for TFC, even if they do not claim any help with childcare costs through tax credits, their whole tax credit claim will be automatically terminated. If they live in an area where universal credit full service has rolled-out they may find that they are not able to claim tax credits again and this is very confusing.”

Someone is not entitled to TFC if they claim tax credits (any tax credits, not just childcare support) or universal credit. They also cannot receive childcare vouchers or directly-contracted childcare via their employer at the same time as receiving help through the TFC scheme. This means that people thinking of applying for TFC need to ensure that it is the right scheme for them before claiming, which involves a series of complex calculations.

Anne Fairpo said:

“For some people, who do not currently receive any government benefits or childcare support, the choice to apply for TFC will be an easy one. However, those on lower incomes who claim tax credits or universal credit or who get help with their childcare costs through their employer need to ensure they seek good advice to make sure that TFC is the right choice for them when compared to the other options. Those new to paying childcare will need to work out carefully which scheme will provide them with the most financial support.

“At present, we do not think there is anything like enough clear guidance and support to help people fully understand the rules and conditions of each scheme and to understand how the schemes interact and which one will be most financially beneficial. It is crucial that the Government do more to support parents and carers with these difficult decisions. As well as more guidance, we would like to see an extension of the childcare helpline to provide specialist, trained staff who can help with better-off calculations otherwise there is a risk that decisions will be made that leave people financially worse off and in some cases may be irreversible.”

TFC is a UK wide scheme and runs through an online account which someone pays into to cover the cost of childcare with a registered provider. For each 80 pence that is paid into the account, the Government will pay in 20 pence up to a maximum of £500 (£1,000 if the child is disabled)  Government support per three month entitlement period. This means someone can receive up to £2,000 support per child per year and £4,000 per child if they are disabled.

In order to qualify, claimants must meet a number of conditions including a requirement to be in paid work. Children will be covered by the scheme up until the last day of the week in which the 1st September following their 11th birthday falls. If they are disabled then this is extended to the last day of the week in which the 1st September following their 16th birthday falls.

More information about TFC can be found on GOV.UK.


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