Understanding Tax-Free Childcare and Related Schemes

Introduction

Tax-Free Childcare is a government scheme designed to help working parents with childcare costs. However, you cannot claim Tax-Free Childcare alongside other forms of support such as Working Tax Credit, Child Tax Credit, Universal Credit, or childcare vouchers. Deciding which scheme benefits you most depends on your individual circumstances.

Use the childcare calculator to determine the best support for your situation.

Tax Credits

If you successfully apply for Tax-Free Childcare, your Working Tax Credit or Child Tax Credit will stop immediately. It is important to understand that once these benefits stop, you cannot apply for them again.

Childcare Vouchers

If you decide to switch to Tax-Free Childcare from childcare vouchers, you must:

• Notify your employer within 90 days of applying for Tax-Free Childcare.
• Stop receiving vouchers or directly contracted childcare from your employer.

You may also need to provide evidence to HMRC, such as a copy of the letter sent to your employer, confirming you have left the childcare voucher scheme.

If your partner is part of a childcare voucher scheme, they must also notify their employer and stop within the same 90-day period.

Universal Credit

Before cancelling your Universal Credit claim, wait for a decision on your Tax-Free Childcare application. Cancelling Universal Credit prematurely could lead to a gap in childcare support.

Bursaries and Grants

If you or your partner receive a childcare bursary or grant—or expect to receive one in the next three months—you cannot claim Tax-Free Childcare. Plan accordingly and evaluate your options to maximize support for your childcare expenses.

Key Takeaways

• You cannot claim Tax-Free Childcare alongside Working Tax Credit, Child Tax Credit, Universal Credit, or childcare vouchers.
• Use the childcare calculator to determine the best option for your needs.
• Be mindful of deadlines when transitioning from other schemes to Tax-Free Childcare.