This Q&A was provided to SME magazine exclusively by HMRC
The new financial year is often an opportunity to get organised for the year ahead. For self-employed parents juggling the demands of running a business with caring for their family, it could also be a good time to review the family planner and take a fresh look at the household budget to ensure they’re getting all the support they’re entitled to.
SME Magazine asked the experts at HM Revenue and Customs (HMRC) to outline the financial help available for our readers so they can access the childcare they need while keeping an eye on their bottom line.
What help is available for self-employed parents?
There are a number of schemes available that could be worth thousands of pounds a year including Tax-Free Childcare, free childcare hours, Universal Credit, tax credits and Child Benefit.
What is Tax-Free Childcare?
Tax-Free Childcare is a government funded top-up scheme for working parents, including the self-employed. It can save parents up to £2,000 a year per child – or £4,000 if their child is disabled – to put towards the cost of childcare. For every £8 paid into a Tax-Free Childcare account, the government tops it up with another £2.
Who is it for specifically?
Working families including self-employed parents. Latest statistics show more than 63,000 families, with at least one self-employed parent, use it to help pay for their childcare. Families should check out the full eligibility on GOV.UK but in summary it’s for working parents or guardians, including those who are self-employed, who:
- have a child or children aged up to 11. They stop being eligible on 1 September after their 11th If their child has a disability, they can receive support until 1 September 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 up to £100,000 per annum
- do not receive tax credits, Universal Credit or childcare vouchers.
What can I use it for?
Tax-Free Childcare can be used flexibly to pay for any approved childcare that suits your family’s needs. You can use to pay for childminders, nurseries and nannies, before and after school clubs, holiday or activity clubs. If you find a provider you want to use and they’re not signed up, encourage them to do so by going to Childcare Choices for more details of how to sign up and what it means for them.
How do parents open an account?
It’s simple to open an account via GOV.UK and only takes about 20 minutes. Accounts can be opened at any time of the year and can be used straight away, money can be deposited at any time and used when needed. Any unused money can be simply withdrawn at any time.
Account holders will be reminded every three months to confirm their details are up to date to continue receiving the government top-up.
I have more than one child in different childcare settings – can I use it for both?
Yes! If families have more than one eligible child, they will need to register a Tax-Free Childcare account for each child. The government top-up is then applied to deposits made for each child, not household.
For more information about Tax-Free Childcare and how to register go to GOV.UK
Can Tax-Free Childcare be used with the free hours offer?
Yes! If you meet the eligibility criteria, you can receive both free childcare hours and Tax-Free Childcare. In England, eligible working parents of 2 year-olds have been able to access 15 hours free childcare per week since 1 April This the first step in the rollout of the largest investment in childcare in England’s history.
The offer will expand to 15 hours free childcare for working parents from nine months old up to when their child starts school by September this year, and 30 hours by September 2025. This is set to save parents using the maximum allowance up to £6,900 per year.
Can I use Tax-Free Childcare with Child Benefit?
Yes! Child Benefit is worth £25.60 per week for the oldest or only child and £16.95 per week for each additional child. It can be claimed by parents or guardians once you have registered your child’s birth and can be claimed up to age of 16 or 20 if the child stays in approved education or training.
In addition to financial support for your family, Child Benefit ensures parents qualify for National Insurance credits which could help protect their state pension, and also helps children automatically receive a National Insurance number when they reach 16.
You can now claim Child Benefit online and manage your account via the HMRC app. To check eligibility and make a claim go to GOV.UK.
Can I use Tax-Free Childcare while claiming Tax Credits or Universal Credit?
No, but tax credits offer alternative childcare support that could also be worth thousands.
If you already claim tax credits, you’ll receive a letter from HMRC by 19 June. There are two types of letters to look out for: if your renewal pack has a red stripe across the page then you will need to check the information, renew and report any changes by 31 July otherwise you risk your payments being stopped. If your renewal pack has a black stripe across the page, you need to check the information is correct, and only contact HMRC if you have any changes to report.
Tax credits are being replaced by Universal Credit by April 2025. Many customers who move from tax credits to Universal Credit could be financially better off and can use an independent benefits calculator to check. If customers choose to apply sooner, it is important to get independent advice beforehand as they will not be able to go back to tax credits or any other benefits that Universal Credit replaces.
You cannot claim Tax-Free Childcare and Universal Credit at the same time.
How do I know which offer is best for me?
Go to Childcare Choices to find the right childcare offer for your family.
