Childcare Benefits and Tax Credits

March 5, 2023
This guide was last updated on:
February 18, 2023

Benefits and Tax Credits for Childcare

When you make the decision to parent, you're making a life-changing commitment. From this point on, everything will be different, not least your financial status. Raising children is a challenging and expensive task, especially when you have a job to also focus on. Fortunately, there are many forms of assistance available to assist lighten your burden.

One of the most well known is Child Benefit. This weekly sum was introduced by Her Majesty's Government in 1990 to all families with children. While many changes have been made and benefits removed over the years, this form of payment remains one of the simplest forms for families or carers to receive. For those raising a child, you may be entitled to receive up to £20.60 each week to help support your family. It is not means-tested, so you don't have to prove that you are unable to provide for yourself or your child, which can make the process much easier.

The eligibility criteria are very simple - if someone in your household acts as a carer for and child under-16 and up to 19 years old, that person is automatically entitled to child benefit. There are no other criteria and you don't have to be working to receive it. Even if someone else in the household has an income of more than £50,000 a year (rising to £60,000 from next year), they can still claim Child Benefit if they are a carer.

There is a claim form that you can fill out and send in by post or online. To do so, visit the Child Benefit website. You will need to provide your National Insurance number, details of any other children living with you, such as their date of birth and your bank details. For the quickest service, you can apply online or call the helpline on 0300 200 3100 to get a claim form sent to you in the post.

What resources are available to assist with childcare expenses?

Childcare assistance is available in a variety of forms. You could be eligible for tax relief on your salary, or certain benefit payments to cover your expenses. Tax-Free Childcare also exists, where the government contributes money to the difference you save specifically for childcare costs. If you're employed via PAYE, your employer may have a program in place for this, while you can also receive a Universal Credit payment to cover the cost.

One other benefit that has been introduced in recent years is tax-free Childcare, which was announced by Chancellor George Osborne during his summer 2015 budget.

What is Child Benefit, and how does it work?

Child Benefit is designed for people with children under the age of 16, and it's paid at a fixed rate of £20.70 per week (as of 2019/20). For each additional kid, you receive an extra £13.70 (again, under 2019/20 rates) per week. You are entitled to Child Benefit until your child reaches age 16, or 19 if they remain in full-time education.

What is Tax-Free Childcare and how does it work?

You can earn £2,000 a year in tax-free childcare per child aged 11 or younger under the Tax-Free Childcare plan. To get things started, you'll need to create an online account. For every £8 you spend on permitted childcare expenses, the government will deposit £2 into your account, essentially eliminating the basic rate of income tax on that sum.

Tax-Free Childcare includes the following expenses:

  • Nurseries,childminders and nannies.
  • After-school clubs.
  • Agencies providing home care.

In order to qualify, your provider must be enrolled in the program. You must also earn at least £131.36 per week (average out over three months) if you are over 25 years old. Self-employed people with irregular earnings can still participate. They may use an anticipated average for the current tax year if that is necessary, but you must inform HMRC if your earnings drop significantly.

You can apply for Tax-Free Childcare online.

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