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Tax credits childcare support: how does it work?

Updated on 20 April 2023

Childcare

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.

Illustration of the words tax and credits

Each award of tax credits can only last for a maximum of one tax year, so claimants must renew their 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 and benefit section.

Working tax credit (WTC) and child tax credit (CTC) 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.

Included in WTC is 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, up to a limit of £122.50 a week (70% of childcare costs up to £175) for 1 child and £210 a week (70% of childcare costs up to £300) for 2 or more children. However, you should bear in mind that your overall tax credit award depends on your household circumstances and income and can change as your circumstances or income changes.

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

You can read more about tax credits in our tax credits and benefits section.

Tax guides

Introduction to the tax system How do I work out my tax? What income is taxable? What tax allowances am I entitled to? What tax rates apply to me? How is my tax collected? What if I cannot pay my tax bill? Do I need to complete a tax return? Self Assessment: understanding the basics What is Simple Assessment? How do I claim tax back? How do I claim back tax I have overpaid through PAYE on wages or pensions? How do I claim back tax if I complete a tax return? How do I claim back tax if I am taxed under the Construction Industry Scheme (CIS)? How do I claim back tax on savings income? How do I claim a marriage allowance refund? How do I claim back tax on a payment protection insurance (PPI) pay-out? Should I use a tax refund company? What is National Insurance? How do I get a National Insurance number? What are Specified Adult Childcare credits? What is Scottish income tax? What is devolution? Do I have to pay Scottish income tax? How does Scottish income tax work? What is Welsh income tax? Do I have to pay Welsh income tax? Do I have to join a pension scheme? Tax relief on your pension contributions HMRC digital services Enquiries, penalties, appeals, complaints and debt Enquiries How to survive an enquiry by HMRC Tax penalties Tax appeals Alternative Dispute Resolution How do I complain to HMRC? What if I cannot pay my tax bill? What if I have a tax credits overpayment?
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