HM Revenue and Customs is encouraging families to sign up to a scheme that can help boost your childcare budget by up to £2,000 per child every year ahead of the new term
The latest figures from HM Revenue and Customs (HMRC) reveal that nearly 826,000 working families, including 35,095 in Scotland, secured savings of up to £2,000 per child through Tax-Free Childcare during the 2024 to 2025 tax year.
The funding assists families in covering their childcare expenses, forming part of the UK Government’s Plan for Change aimed at increasing household income. HMRC is urging those who haven’t yet registered for Tax-Free Childcare sign up immediately to ease costs throughout the upcoming academic year.
Parents can utilise the programme to contribute towards approved childcare expenses, whether that’s nursery provision for younger children, or for older children – wraparound or after-school care clubs during term time or holiday programmes for extended summer breaks. This news comes after thousands of Brits to get a shock letter from HMRC after drastic new tax rule comes into force.
READ MORE: ‘I’m a mum and this is how much my daughter’s nursery bill costs – people are gobsmacked’READ MORE: Number of kids registered for free childcare soars – as more parents to benefit
Working households who register for Tax-Free Childcare can enhance their yearly budget by up to £2,000 per child until age 11 or up to £4,000 until age 16 for a child with a disability.
Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “Whether your child is interested in football, climbing, crafting or dance, there’s a huge variety of childcare settings accepting Tax-Free Childcare. Children can learn something new and have fun with their friends while their parents save on their childcare bills. Visit GOV.UK to sign up today.”
Andrew Bartlett, chief executive of Advice Direct Scotland, said: “It is good news that more families are making use of this support, which can provide real help at a time when household budgets are stretched by the cost-of-living and energy crisis. But many parents are still missing out, often because they are unsure how the scheme works or whether they qualify.”
He added: “It’s vital families check their eligibility and sign up so they can get the help they need to cover childcare costs”.
Tax-Free Childcare explained
For every £8 paid into a Tax-Free Childcare account, the UK Government adds £2, meaning parents can claim up to £500 (or £1,000 if their child has disabilities) every three months towards covering their childcare expenses, reports the Daily Record.
After families have established a Tax-Free Childcare account, they can deposit money and spend it immediately or store it in the account to utilise whenever required. Any remaining funds in the account can be taken out at any point.
HMRC stated it requires just 20 minutes to register online for a Tax-Free Childcare account.
Eligibility for Tax-Free Childcare
Families might qualify for Tax-Free Childcare if they:
- Have a child or children aged 11 or under. They stop being eligible on September 1 after their 11th birthday. If their child has a disability, they may get up to £4,000 a year until September 1 after their 16th birthday
- Earn, or expect to earn, at least the National Minimum Wage or Living Wage for 16 hours a week, on average
- Each earn no more than £100,000 per annum
- Do not receive Universal Credit or childcare vouchers
A comprehensive list of the eligibility criteria can be found on GOV.UK here.
Financial aid for parents in Scotland
Social Security Scotland provides five family payments that can assist with additional school term costs as well as everyday family expenses such as food, clothing and outings. Scottish Child Payment is a weekly payment of £27.15 for eligible families with children up to 16 years old – the payment amounts to £108.60 every month and is exclusively available in Scotland.
Together with Child Benefit payments from HMRC, parents could receive up to £212.20 each month in extra support. Child Benefit is a separate UK-wide payment worth £26.05 for the eldest or only child and is also paid every four weeks, totalling £104.20.
The three Best Start Grant payments and Best Start Foods, also part of social security support, are intended to assist families during key stages in their children’s early years, including pregnancy.
There is no limit to the number of children in a single family who can receive these payments.