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Parents are being encouraged to check whether they are missing out on a tax-free childcare bonus of £500.
Families using tax-free childcare accounts to pay for their childcare costs could receive a Government top-up worth up to £500 every three months, but thousands are missing out on the payout, HM Revenue & Customs (HMRC) has warned.
Tax-free childcare allows parents or carers who have children aged up to 11, or 17 if their child is disabled, to pay their childcare provider through the scheme, and receive a 20 per cent Government top-up on any money deposited. The top-up is paid directly into the child’s account and is ready to use almost instantly.
Parents and carers can get up to £500 every three months (up to £2,000 a year) for each child to help with the costs of childcare. This goes up to £1,000 every three months if a child is disabled (up to £4,000 a year).
Currently, almost 248,000 families across the UK saved money using tax-free childcare in December 2020, an increase of almost 43,000 families from December 2019, who have received a share of more than £25 million in Government top-up payments.
Families can use the money to pay a wide range of childcare providers, including childminder fees, after school clubs or sports activities, where the provider has signed up for tax-free childcare.
Families could also save money now to earn the Government top-up and use the money to pay for childcare, summer camps and play schemes during school holidays.
An HMRC statement said: “As children return to their schools, after-school clubs and nurseries, help is available towards the cost of childcare.
“Families using tax-free childcare to pay their childcare provider are already benefiting from the 20 per cent Government top-up on deposits. To find out more search ‘tax-free childcare’ on GOV.UK.”
Tax-free childcare is also available to families with pre-school aged children attending nurseries, childminders or other childcare providers.
The tax-free savings on childcare costs can provide financial support to families affected by the pandemic. If parents and carers’ working patterns have changed because of COVID-19 or they have received either furlough payments or the Self-Employment Income Support Scheme grant, they may still be eligible to receive tax-free childcare.
Each eligible child requires a tax-free childcare account. If families have more than one eligible child, they will need to register an account for each child.
The 20 per cent Government top-up is then applied to deposits made for each child, not each household.
Account-holders must confirm their details are up to date every three months to continue receiving the top-up.