Childcare Vouchers V Tax Free Childcare

[MrsWarleggan]

Posting here for traffic.....

I need real life examples of how the Tax Free Childcare system works. I know all the gumpf is online, but I can't make head nor tails of it and just need it put into simple terms!

I am currently claiming the full £243 in vouchers from Sodexo. We have had to put DD2 into childminders for an extra day a week. Whereas the £243 used to cover us, added with DD7 breakfast club now it no longer does.

DH used to get vouchers through Edenred but his new employers are unable to do this so he has to go for Tax Free Childcare. I understand that if one parent goes for TFC then the other parent claiming CV would need to withdraw from the scheme and also sign up to TFC... Is this right?

If so.... How does it work? Is there a cap as to how much you can put in each month?

If we were to both put in £150 each month how much would we actually have to spend?!

I'm rubbish at things like this and want to make the best choice for us financially!

TIA 😊

@Blueeilidh

Some of the responses here aren't correct. It isn't a case of you put in X amount and the government top up 20%. The 20% is what the government pay of the total child care cost so in effect they top up 25%. Say you needed to pay £100, you would put in £80 and the government would put in £20. So if between you, you put in £280, the government would add £70 making £350.

Exactly this. That's why you need to pay £288 to get to £360

(Although I can't work out where 25% comes from as I can only see the govt topping up 20% in any scenario)

But it is a confusing system!!

Or take what you are putting in to TFC and times by 1.25

So £280 x 1.25 = £350
Topup is £70 (20% of £350)

So £288 in would give £360 after topup is added.

Can i pls ask a question on this and sorry if its already been answered. Ex H and i split. We split childcare bill for before and afterschopl club 50:50 and pay via parent pay. Can we both claim for tax free childcare and also is there a cap on if you earn a certain amount? Thanks

@Starbrand

Can i pls ask a question on this and sorry if its already been answered. Ex H and i split. We split childcare bill for before and afterschopl club 50:50 and pay via parent pay. Can we both claim for tax free childcare and also is there a cap on if you earn a certain amount? Thanks

I'm only mostly sure on this so other posters will correct me if I'm wrong!

But it's not a tax benefit that you yourself claim as such.

You open an 'account' with the government portal in the child's name (child can only have one account).

This becomes sort of like a bank account with its own sort code and account number.

Each month if you and your husband add in your share of childcare costs, the govt will top up (within the caps of £500 total top up a quarter).

You'll then need to go into the govt account and transfer to the childcare provider or set up standing order.

There isn't a cap on eligibility earnings as far as I'm aware

@Starbrand

Can i pls ask a question on this and sorry if its already been answered. Ex H and i split. We split childcare bill for before and afterschopl club 50:50 and pay via parent pay. Can we both claim for tax free childcare and also is there a cap on if you earn a certain amount? Thanks

This gets tricky. Does either of you have sole custody? If so, then they make the claim for TFC.

If you are separated and have joint responsibility for your children, but you are caring for the children say Mon-Thurs and your ex-H cares for them Fri-Sun, then it is tricky. If you both claimed, then they would be Competing Claims... and TFC will ask you more questions and determine who gets to claim and who does not.

If one of you earns over £100,000 per year, then that person is not eligible to claim TFC.

25% of £288 is £72
£288 + £72 = £360

Use this link, it will calculate what you need to pay in to cover your costs taxfreechildcarecalculator.com/
The government will give you £2 to every £8 You pay in, capped at £500 for every 3 month period

It's easier to think about it using simpler numbers.

£100 is your childcare bill. For every £8 you pay the gov tops up £2.

So you pay £80 and gov pays £20.

£20 is 25% of £80.

Ok, that's better than I thought then.

@Blueeilidh Ahhh I get it. So they contribute 20% of the total childcare bill but essentially add 25% of your contribution.

So you can either:
Work backwards: total childcare bill x 0.8 = your contribution
Work forwards: your contribution x 1.25 = total childcare bill

I'd not considered that way before!

If changing to TFC, make sure the providers you use accept it. Providers don't have to accept all the different payment systems.

"@Blueeilidh Ahhh I get it. So they contribute 20% of the total childcare bill but essentially add 25% of your contribution.

So you can either:
Work backwards: total childcare bill x 0.8 = your contribution
Work forwards: your contribution x 1.25 = total childcare bill

I'd not considered that way before!"

Yes I normally do both calculations to double check I've got the right amount.