Coronavirus: Accessing money in childcare schemes
The coronavirus (COVID-19) outbreak is having far-reaching financial impacts on individuals and businesses across the UK, and indeed across the world.
You may well be considering what funds you can access to keep you afloat in these difficult times. You may use the Tax-free Childcare scheme or use childcare vouchers from your employer and wonder whether you can withdraw from those accounts.
This page looks at both childcare schemes and the implications of taking money out.
If you get help towards your childcare costs through tax-free childcare (TFC) and have a tax-free childcare account, you will pay money into your account which (subject to certain conditions) usually attracts a Government top-up and then make payments to your childcare provider from the account.
However, you are free to withdraw any money you have put into account - but you should be aware of the potential consequences of doing that.
The amount you withdraw from your TFC account will be deducted from the total sum in the account that attracts the Government top-up payment. So, the more money you take out that is not for childcare, the less contribution you will get from the Government.
If the amount you withdraw has already had the TFC top-up, then you will have to repay to HMRC the value of the top-up that corresponds to the amount of your withdrawal. For example, for every £8 you withdraw (i.e. that you don’t use to pay your childcare provider), HMRC will take back (or you need to pay back to HMRC) the government’s £2 contribution.
We suggest you contact the HMRC Childcare Service helpline for advice if you are considering this.
Childcare vouchers (Employer-supported childcare)
If you are part of your employer-supported childcare scheme, you may be part of a salary-sacrifice arrangement whereby you have agreed to take less salary (up to a limit) in exchange for employer childcare vouchers (or directly-contracted childcare) and consequently benefit from relief on tax and national insurance contributions on the value of your employer-supported childcare vouchers.
Our understanding is that it is usually not possible to get a refund on any excess childcare vouchers unless your employer allows it and adjustments would need to be made for the tax and NI savings given. You should speak to your childcare voucher company and employer.
You can ask to stop receiving childcare vouchers or directly contract childcare through your employer scheme temporarily without having to leave your scheme, providing you re-start taking your vouchers (or workplace nursery option) within 52 weeks – for example, if you don’t need the childcare vouchers for a while or you need to stop your salary sacrifice arrangement for a while.
The important thing to remember here is that your temporary break from your employer’s scheme must not last more than 52 weeks, otherwise you won’t be able to re-join and may need to look for other types of support towards your childcare costs.