To ask for some quick help with Tax Free Childcare

[FuckedOverByBuilder]

Apologies for using AIBU for quick responses.

I have been using this for nursery with no problems. My son has been attending pre and post school clubs and I've just found out that they also are set up for tax free childcare.

However, the amount I spend each month is less than my allowance. e.g. I get £500 every 3 months (as does everyone) which is c£166 a month.

But the cost of the childcare is £148 a month. Meaning I should get it free.

However, to trigger the money into the account, I have to transfer money in and they'll add 20%.

So each month, I have to transfer c£750 a month for the govt to top up the £148. Can I then withdraw the £750 again?

How do other people do this when the invoice is less than the allowance?

Thanks and apologies for a probably silly question!

So tax free childcare gives you the tax back on your childcare costs, so that essentially its like you pay them from your pay before the tax.

You don't get £500 free. You get the tax on what you spend on childcare.

I don't believe you can take the money back out. If your childcare bill is so low the tax free childcare value you can access is essentially only a percentage of what you spend on childcare.

I think you’re misunderstanding how TFC works. Basically the government pays 20% of your childcare bill up to the monthly allowance eg if you monthly bill is £100, you put in £80 and the Govt will top up £20

Goodness no. You pay 80% and gov pays 20%, you don't get it free.

Btw if you do take the money back out, you lose the top up.

No. If you withdraw the £750 for anything other than childcare it will remove the top up

So pleased I asked the question!!

I've seen threads where people talk about using free hours and think I got these mixed up!

That's a shame but makes more sense than the govt giving something totally free!

Thanks for the responses!

If your childcare cost is only £148, you can only access £30 or so of the tax free childcare allowance.

You don't have to pay in a minimum amount for the government 'top-up' - 20% gets added to whatever you pay e.g. you pay in £8 and £2 is added. We only use the account for after school care now which is around £100-£130 per month. I haven't done it but yes you can withdraw money from the account (obviously only what you paid in, not the top-up)

No, you can’t withdraw your money like that. Doing so will also cause the government payment to be retracted. Basically consider it as a top up - for every pound you put in, the government tops it up by 20% up to a maximum of £500 over 3 months. You take your money out, the government (or rather HMRC) do the same. It’s not free money, you have to pay too.

I think you have misunderstood, the government pay 20% up to a maximum of £500. Not everyone gets £500. It sounds like you will need to pay nursery out if the money already in your account for quite some time now to work through it.

I get £500 every 3 months (as does everyone) which is c£166 a month.
But the cost of the childcare is £148 a month. Meaning I should get it free.

You don’t, you her 20% up to a maximum of £500 in a 3 month period.

Although your child may be eligible for funded hours “free hours” if you have one in nursery still.

Yes my youngest gets free hours and I just completely merged the two things 🤦🏻‍♀️

You can use tax free childcare to cover additional fees you might have to pay above your free childcare hours. For example, I get 30 hours free childcare but I use an extra 8 hours per week (as I work full time). This costs approx £50 per week. So I use my tax free childcare account and pay in £40 each week and HMRC top it up by another £10 (20%) to make up the difference.

My son's bill was about £400, but after the free hours the leftover charge was £100. I paid in £80 to TFC. Top up arrived, and then I transferred £100 each month back to the nursery.