Please help me with Tax Free Childcare

[eensyweensySpider]

I've posted this a few minutes ago, just copying over in case it's more relevant here.

DS is due to start nursery this summer (date not been confirmed yet) and I'm trying to get my head around how the Tax Free Childcare scheme works. I've checked and that's the option we are eligible for and nursery is definitely accepting this form of payment.

I've got as far as opening an account on the gov website and we have a savings account with money put aside to cover at least the first 6 months of DS's nursery fees. But this is when I'm getting a bit confused / things not being clear to me.

• Do I transfer the money over now, or when DS starts.

• Do I transfer all the money or monthly? Does it matter?

• Does the amount get topped up as soon as it hits the gov account or does the gov pays the nursery directly with the "top up" fund?

• Can I take money out once I've put it in?

• What have I not thought of?

It might be easier if you just let me know how YOU do it so I can see how it all works :)

Thank you 😊

I transfer monthly once I get the invoice from the nursery. I'm not sure it will make an difference tbh.

The gov top up is added to your account once the money is paid in (up to a maximum of £500 over 3 months).

The government top up is limited to £500 per quarter I think, so the first £2000 you put in is topped up. If you have more than that in savings then don’t put it all in at once.

I then tend to keep it a month ahead, so I can pay nursery by 1st of the month. I'm paid on the second to last working day of the month so the exact date varies. As it takes a couple of days to clear from transferring it in to it reaching the provider.

Yes the amount gets topped up in the account the same day or day after as the funds are deposited in by you, depending on exact times.

Yes, you can take money back out, the top up then gets taken back for that amount too.

Payments can be set up to go regularly but I go in each month to pay as a one off as my nursery bill varies each month.

Don't forget you need to renew each quarter/term, you should get reminder emails.

I have recently gone through setting this up.

You can pay as much as you like in but you will only receive the tax back on the limit on a three month basis. We just transfer money in one go every three months. Enough to get the tax break and also a top up so we can cover the nursery payments. The government top up gets paid into the account so you can then pay the nursery from there. You can set it up now and start putting money in. I am expecting another baby and am planning on setting up the account ASAP after birth.

It does make a difference when you deposit as the government top up happens when you deposit. So maybe every other month max, you want to make sure you get the full top up.

Also are you starting full time?

I deposit monthly. Let's say I do this at 10am. By 3pm that same day, the government has put the top up into the government account. Then I go in an set up a payment to the nursery from the government account.

I had to do this manually when we were going part time. Now we are full time, I have standing orders.

Happy to answer any questions.

I will presume that your quarterly bill is over £2500 as if you’re starting you probably won’t get 30 hours free for a 3 year old. In that case as you have money sitting in the bank pay £2k over ASAP. The government will make it £2500. It sits there until you use it. Three months after your account was set up you will need to reconfirm- pay over another £2k then. If you are spending more than £2500 a quarter always pay the maximum each quarter as you’ll eventually use it up, you can drip it in rather than quarterly if that’s easier but make sure you use up your allowance before the reconfirmation date. You can always take your money out and it won’t earn much in the bank.

One thing I learnt is you can't set it up more than 30 days before your child starts nursery as I was too keen by 4 days!

Thanks everyone, I'll add a bit more detail. He'll be 15 months old by the time he starts, he'll be attending two full days a week, weekly cost is roughly £120.

I haven't read all your replies in detail yet, but just wanted to give a bit more info as I saw you mentioned quarterly payments / caps etc.

At £120 per week you won’t come anywhere near hitting the cap, so don’t worry about that.

To the person planning on setting up the account as soon as their child is born - you can’t do it until a month before you go back to work.

I just transfer 80% of my bill (which varies each month) from my account to the childcare account. The government top up goes in within a few hours, taking it to the full amount, I then send payment to the childminder. Once it’s set up it’s super easy.

I've read all your comments now and they have all been very helpful and informative, thank you very much! It does make perfect sense and I'm sure it's going to be pretty straight forward once it is set up