Thousands of families risk missing out on £2,000 childcare savings as December 31 deadline looms
Are you missing out on up to £2,000 for childcare? Tax-Free Childcare could save parents up to £2,000 per child annually, but many are missing out as the deadline to apply approaches.
With the deadline to apply for the next term of Tax-Free Childcare fast approaching, parents are being urged to act now to avoid missing out on vital support. The government scheme, which provides a 20% top-up on childcare costs, could save families up to £2,000 per child each year—or £4,000 for children with disabilities.
Yet despite its benefits, an estimated 800,000 eligible families are not claiming the support they’re entitled to, according to financial expert Martin Lewis.
What is Tax-Free Childcare?
Tax-Free Childcare is a government initiative designed to ease the financial burden of childcare for working families. For every £8 you pay into a designated childcare account, the government adds £2, up to a maximum of £500 per quarter per child.
The scheme can be used to cover childcare expenses such as nurseries, childminders, after-school clubs, and some holiday camps.
“This isn’t about tax—it’s essentially a government top-up to help with childcare costs,” explains Martin Lewis, founder of Money Saving Expert. “It’s a lifeline for working parents, but many are unaware or confused by the scheme’s misleading name.”
Who is eligible?
To qualify for Tax-Free Childcare, parents must meet certain criteria:
- Employment:
- Both parents (or the sole parent in single-parent households) must be working.
- Self-employed parents are also eligible.
- Income:
- Each parent must earn at least the equivalent of 16 hours per week at National Minimum Wage.
- Neither parent can have an adjusted net income over £100,000 per year.
- Child’s age:
- The child must be 11 or under (or 17 if they have a disability).
Parents already claiming Universal Credit, Working Tax Credit, Childcare Vouchers, or similar benefits are not eligible for Tax-Free Childcare.
Why the urgency?
The application deadline for accessing Tax-Free Childcare for the next school term is fast approaching. Families must apply and set up their childcare accounts by 31 December to avoid missing out on savings.
Additionally, eligibility must be reconfirmed every three months. This is a quick process, but it’s essential to maintain access to the government top-up.
How to claim Tax-Free Childcare
To start benefiting from Tax-Free Childcare, follow these steps:
- Visit the Childcare Choices website and apply through your Government Gateway account.
- Once approved, set up an online childcare account.
- Deposit funds for childcare expenses—every £8 you pay in is boosted by £2 from the government.
Parents can also use the website to check their eligibility if they’re unsure about qualifying criteria.
Why aren’t families claiming?
The scheme’s confusing name is often cited as a barrier to uptake. Martin Lewis has described “Tax-Free Childcare” as “appallingly named,” suggesting that a clearer title such as “Childcare Savings Top-Up” would help parents understand the benefit.
In addition, the need for quarterly reconfirmation and misunderstandings about income thresholds or employment status mean some eligible families don’t apply.
The cost of missing out
Childcare is one of the largest expenses for working parents in the UK, and this scheme offers significant financial relief. By claiming the maximum £2,000 per child, families can offset a large portion of these costs.
“Failing to claim is like turning down free money,” says Lewis. “With budgets tighter than ever, this support can make a real difference to family finances.”
Act now to secure your savings
The deadline for applying to benefit from Tax-Free Childcare for the next term is looming. Don’t delay—visit Childcare Choices to apply or confirm your eligibility today.
By taking action now, families can ensure they don’t miss out on vital financial support designed to ease the cost of childcare.
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Authors
Ruairidh is the Digital Lead on MadeForMums. He works with a team of fantastically talented content creators and subject-matter experts on MadeForMums.
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