Don’t miss out on Tax-Free Childcare

Published: 17th February 2023

HMRC has reported that over 400,000 families used the Tax-Free Childcare (TFC) scheme in December. Now it’s urging families to check their eligibility so they don’t miss out. What’s the full story?

Childcare voucher schemes used to be very popular, but have been closed to new applicants for several years. In their place, the government introduced TFC – financial support for working families with children up to the age of 11, or 16 if they have a disability. TFC requires an eligible family to open a TFC account which is used to pay childcare costs. The financial support comes from a top-up by the government. For every £8 paid into a TFC account, the government adds £2. This is restricted to contributions of £500 for each child every three months (£1,000 in the case of a disabled child).

HMRC’s latest press release states that over 400,000 families used the scheme in December 2022, receiving £41.5 million in top-up payments. It’s urging families to check eligibility and apply. However, if you are in receipt of childcare vouchers (still available to those in schemes prior to 4 October 2018) you might be better off. It’s crucial to understand that if you successfully apply for TFC, you will not be able to revert to vouchers if your circumstances change, e.g. if your or your partner’s income increases above the £100,000 maximum for TFC. You can use this tool to check the best option for you.