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What is Tax-Free Childcare and Childcare Vouchers?

Your Guide to understanding Tax-Free Childcare and Childcare Vouchers

The majority of Premier settings are Ofsted registered, meaning we can accept Tax-Free childcare as a form of payment for our provision.

Tax-Free childcare can be a great choice for parents, even though it may seem a bit tricky to set up and use for your childcare expenses. Please note, we do also accept Childcare Vouchers, but these aren't available to new employees from 2018 onwards. So, if you've started a new job recently, this option isn't open to you.

If you find Tax-Free childcare a bit confusing, we're here to help you navigate it. If you have any questions do feel free to reach out and contact the support team here Help Center | Create Support Ticket (premier-education.com).


What Is Tax-Free Childcare?

Tax-Free childcare is a government scheme designed to help working parents with their childcare costs. It offers up to £2,000 per child per year (or £4,000 for children with disabilities), depending on your circumstances.

Keep in mind that parents who use Tax-Free childcare can't claim childcare tax credit or universal credit.

Tax-Free childcare is available to:

  • Families with children aged 0-11 (or 0-16 if disabled)
  • Working families in the UK
  • Those who are not receiving Childcare Vouchers, Universal Credit or Tax Credits
  • Those earning at least the National Minimum or Living Wage for 16 hours a week, or under £100,000 a year.

For more information, visit the Government's Childcare Choices website https://www.childcarechoices.gov.uk/.


Whare are Childcare Vouchers?

The Childcare Voucher Scheme was an innovative UK government initiative designed to assist working parents with their childcare costs. By enabling employees to exchange part of their pre-tax salary for Childcare Vouchers, the scheme provided tax efficiencies and savings. This process, known as salary sacrifice, allowed the total amount exchanged to be exempt from tax and National Insurance, leading to potential savings for employees of up to £933 per year.

The scheme also benefited employers, allowing them to make savings on employer’s National Insurance Contributions. This made it an advantageous setup for both parties involved. Parents who participated in the scheme had access to an online Childcare Voucher account, which facilitated payments to their registered childcare provider, such as Premier.

However, Childcare Vouchers were only available to employees, excluding self-employed individuals, who had joined the scheme by October 2018 and maintained eligibility. The vouchers were usually provided by the employer, often via a selected childcare voucher scheme provider. Various Childcare Voucher companies operate in the UK, each with its platform for managing the parent/employer side of registration. This allowed for a streamlined and efficient process to support effective childcare.


Childcare Financial Support Schemes (CFSS)

At Premier we refer to TFC & CCV under the umbrella term Childcare Financial Support Schemes  (CFSS) throughout our systems. Click here to find out more.


How does it work?

To use the scheme, you create an online childcare account for your child. For every £8 you put into this account, the government adds an extra £2. This effectively gives you an extra 20% - the basic rate of tax - on what you spend through your online childcare account.

You can then use this money to cover your childcare costs.

Remember, you need to reconfirm your eligibility for Tax-Free Childcare every three months. You'll get a reminder by text message and it's easy to do through your online childcare account.


Am I eligible?

To get Tax-Free Childcare, you need to be working at least 16 hours a week, earning at least the National Minimum Wage or National Living Wage.

This includes:

  • Being self-employed
  • Being on maternity or parental leave
  • Being on sick leave or annual leave

Your child is eligible until the September after their 11th birthday, or until their 17th birthday if they have a disability.

Each parent or carer can earn up to £100,000 per year and still be eligible for Tax-Free Childcare. It doesn't matter how much tax you pay, so it won't affect your income tax liability or any other tax, such as VAT.

You can't claim Tax-Free Childcare at the same time as Working Tax Credit, Child Tax Credit or Universal Credit.


Find out more..

To see how much you could get towards your childcare costs and check whether you're eligible, visit www.childcarechoices.gov.uk