Should I max-out the tax-free childcare even if I don't need it all now?

[Bunny44]

Hello, so I currently have a child in nursery and paying into a tax-free childcare government account to pay the provider. I didn't know how much it'd be at first so I just paid in the £2000 needed per 3 months to got the extra £500 government top-up. Turns out mine will be around £1000 every 3 months so I've got way more in there than needed.

I currently earn a bit over £100k as a single parent but pay extra into my pension to reduce my income access this scheme and free hours. My plan was to do that for just until they goes to school - another 3 years.

I can't find anywhere about a time limit on when the amount in the account needs to be spent? I understand you can use the scheme for childcare including breakfast and after school clubs until they are 11. If so should I just pay the max in every term to get the top up until he goes to school and then could I can use this money to pay for clubs even if I at that point earn over £100k?

that's what i plan to do

Yes, that is what we have done.

Worst case you withdraw what you paid in and lose the top op but it's never lost. You can also pay for holiday childcare and some clubs.

I'd potentially think about the balance between the childcare account and setting up something like a lifetime ISA.

As per PP if you end up withdrawing money you don't lose anything, but it could be money that was earning and keeping the extra from the government

Im pretty sure that when we hit 100k and they froze my account the government top up was removed from the amount still in there.

Funny how fiddling the system is acceptable at the top but not at the bottom.

I thought there was a three month limit? Has this been removed?

Yes thanks for your judgement but it's not "fiddling the system" - it's totally legal and very sensible. You also clearly know nothing about the tax cliff edge affecting parents in this bracket which is especially harsh for single parents. You're essentially worse off earning £120k than £99k if you have nursery age kids. Quirk of our system.

Would you rather I lived off benefits and then I'd apparently 'deserve' free childcare instead of paying masses of taxes and claiming zero the last 18 years? 🙄

The whole point of the free childcare hours is to get more women back into work because it's net-contribution positive.

They retrospectively removed it for periods when you earnt under than amount? Or you mean for the year you earnt more?

Yes that's what I was thinking - if it's better in an ISA

I just pay into the childcare account what I need to and put some into an isa for their university and learning to drive years. I also pay into a pension for them as this seems tax efficient
Ignore the haters OP!

Claiming benefits is perfectly legal too. You ARE fiddling the system. Even at 90k you can afford to pay childcare.

What she is doing is perfectly legal. And have you done the math? A single person on 100k can afford childcare for two kids but barely. Full time round here you're looking at 1500 a month per child, so two kids annually that's 36k. Take home pay is £67k per year. so that leaves you with £31k.

for a two bedroom flat to rent or mortgage you're looking at a minimum of £1800 a month (For the record i live in zone 6 of London so nearer town is even worse) and most people with two kids probably want somewhere a bit bigger than that but this is a minimum. so that's 21.5k which leaves 9.5k. Transport to london every day costs about 1-2k a year so that leaves 8k a year.

Annual costs (roughly)
electricity - £1800
Council Tax - £1800
Water - £1200

So that leaves £3200 per YEAR on food, clothes (cos we know kids grow), entertainment for the kids, furnishings, any repairs or any other misc costs and most people want a holiday once a year. That's not a lot to live off.

Or you could add more into your pension and have a decent amount to live off.

You're wrong and clearly talking on a subject you know nothing about. If you're not going to contribute anything useful why are you here? (Rhetorical question)

You're 100% right and earning £100k now is actually not even that high given all the taxes and inflation. A lot of very ordinary people in normal jobs are earning that much and in the South/London that does not make you rich. Comfortable yes, but single parents are for sure not rolling in it.

Also personally I got laid off while pregnant and my ex partner left me, paying no CM, so although I earn over £100k net now last year I earnt nothing and lived off my savings. Now I need to save all I can to rebuild a safety net so we don't lose our home if I lose my job again (volatile industry). Some people are so quick to judge without knowing what you're dealing with...

Is the limit just 11 years? I’m in the old Childcare Vouchers scheme and have a bit of a surplus’s there that I can’t withdraw and would obviously hate to throw away. But I thought you could use it for PGL trips etc that I’d only want to send my kids to when teenagers really. My eldest is 10 so I guess I need to do more research

When our nursery fees were lower my partner and I overpaid to get the £500.

We stopped qualifying for a bit (partner lost his job and we lost tax free childcare while he was job hunting - savage), we didn’t lose the accrued top up and it was helpful to tide us over until we qualified again.

If you can afford to do it, it's definitely a sensible approach. You never know what might happen in the future which could affect your eligibility for the scheme - income going up over the threshold or even redundancy. I pay extra in each month when I can and think I have enough in there for about 6 months wraparound care at the minute. Then if I need a bit of extra cash e.g. putting some money towards our summer holidays, I just stop topping up the tax free childcare account for a couple of months and use that money for the holidays etc instead.