The government has introduced temporary changes that may affect individuals applying for, or already getting, Tax-Free Childcare or 30 hours of free childcare. What do you need to know?

What is Tax-Free Childcare (TFC)? Well, it isn’t completely tax-free childcare, it’s a 20% tax-free bonus to help with childcare costs. Working parents can open a TFC account which is topped up by £2 for every £8 contributed, up to a maximum of £2,000 per child, per year. The money is then used to pay a registered childcare provider. Those earning over £100,000 or less than national minimum wage for 16 hours per week aren’t eligible for the scheme. Parents need to sign back in every three months and confirm their details are up to date, to keep getting government top-ups.

What’s changed?  Due to the coronavirus pandemic, lots of people are facing a reduction in their income. Critical workers on the other hand, may have a higher income this year if they are working more hours due to increased demand or perhaps their colleagues have been taken ill. This means that many people could miss out on TFC when they need it most.

What is the government doing about it? To address this issue, the government has announced that those who are below the normal minimum earnings requirement but would normally expect to earn above it can still access this scheme. Parents that would usually meet the criteria but are having to take time off due to illness, to self-isolate or to care for someone else are also eligible. In addition, critical workers that will have exceeded the maximum income threshold of £100,000 per year because of increased hours as a direct result of coronavirus, are still eligible for 30 hours and TFC for the current tax year.

Follow this link so you can check your eligibility and apply.

Article taken from Tax Essentials for Advisors and reproduced with the permission of Indicator – FL Memo Ltd. For more information visit article is published for information only. It provides only an overview and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the above can be accepted by the author or the firm.