Tax free childcare

[OfficerMeowMeowFuzzyFace]

Sorry if these are stupid questions, I've read the government pages on tax-free childcare and eligibility but am still worried there is a loophole I'm not seeing...

I'm due to give birth in two weeks, and our baby will start nursery at nine months, at a cost of £895 a month, or £10,740 a year. I earn £31,000 and DH earns £27,000. As far as I can see, we're eligible for tax-free childcare scheme, so to save £2000 a year/ only pay £8,740 - is that right? The nursery deposit is due soon - can we use it to save 20% for that? (Presumably not as we don't yet actually have a child?!). When can we start putting money into the account - only once baby actually starts nursery (April 2019), or can we save some up in the account first? And are we definitely eligible - I don't see why we wouldn't be, but I'm worried I'm missing something as obviously we're well over the threshold for any other form of government help except child benefit?

Thanks in advance for help, and apologies again if these are silly questions!

Anyone?

Hi we use tax free childcare
Yes the only criteria from memory is both working earning over £120 pw and under 100k individually each.
Unfortunately you can’t use it to save up before hand (I wanted to do the same!) when you apply you are only eligible if returning from maternity leave within that month from memory.
That aside it’s been a painless process for us; money is automatically topped up and really helps pay the huge fees.

I use it too! It’s really easy to set up but you need an actual child to do it so you’ll need to wait until they’re born.

You cannot create an account until your baby is born to my knowledge, so cannot start paying into it until then. Anyone can pay into it, so grandparents can others can contribute if you would like them to do so.

The 3-month reconfirmation period stars when the account is opened. So every three months you have to reconfirm your eligibility. Also the topup from Government is capped at that 3 months period, so in each period you can pay in £2000 and get £500 topup. If you paid in £3000 in that 3 month period you would only get £500 in topup., not £750.

Important timescales to be aware of:
payments in by debit card: typically clear next working day. Topup is then applied and should then show as cleared funds in the account.
Payments to childcare provider: These take 3-4 working days.
Working Days: Friday evening, Saturday, Sunday, bank holidays are all not working days for this system.
Try to avoid doing anything at weekends.

I've just started using it this month. You won't be able to apply until you're 1 month from returning to work. Once I applied, the account was created very quickly and my first top up was pretty much instant (I paid via debit card).

Whilst on parental leave you cannot apply for help with childcare for the child for whom you are on leave.

So in your case that means that you are only able to apply 31 days before you return to work.

Is it definitely the best option for you compared to vouchers? They have extended the voucher scheme so we are literally about to enter it.
You can both pay for them out of wages

When I researched it, it was a no brainer for me. I'm a high tax payer so could only get about £50 per month from vouchers.
Lower tax payers can get about £70 and both parents can apply so a household could get about £140 from them if both applied to the scheme.
The tax free childcare scheme tops up payments on up to £8k a year so my understanding is that as long as someone is spending at least £10k for childcare in a year then the tax free childcare scheme gives more. However I know some people also claim working tax credit which they would need to give up when joining the new scheme (I think but I'm not 100% sure) so it might not always work as the best option. The calculator on the government website is quite good for a quick personal assessment.

It's also worth noting that the tops up have a 3 month cap of £500 so you cannot 'bulk' the payments over half of the year to receive the maximum allowance of £2,000 (like I was trying to do 😉)

Also, worth adding that I joined the childcare vouchers scheme at the beginning on my mat leave (while I was still being paid by my employer) as the nursery wouldn't accept payments from the tax free childcare scheme at that time and I didn't want to risk ending up with nothing. So you can always join for a few months and then switch to the other scheme...

i think that childcare vouchers are better if you can join a scheme.

Thanks for the information all. I looked it up previously and the guides on, for instance, Money Saving Expert say that tax free childcare is better than vouchers if you pay more than £9,336 in childcare costs as a basic rate taxpayer, which we will be.

Tax free childcare definitely better than vouchers for us too when I looked at it.

Yes have a look at the voucher scheme - it’s approximately 30% saving rather than 20%

Tax free childcare is more beneficial if you have more than one child

Yes have a look at the voucher scheme - it’s approximately 30% saving rather than 20%

Thank you but I checked again and tax free is definitely better for us as maximum amount you can save is about £150 higher and we'd be maxing the scheme out either way.

Aaah yes of course tax free childcare will work out better if you are paying more every month - our nursery fees are around £550 a month hence the vouchers are more beneficial.