How does the 20% tax free childcare work

[19annie86]

I'm eligible for the 20% tax free childcare, just wondering how it works when paying my childcare

If I wasn't eligible cost would be £135 per week, but minus 20% it's £108 per week, when I make the payment to my provider on the gov website do I just set my standing order up for £108 and then the gov top it up to £135

Maybe a silly question but just want to make sure I do it right

Yes, that's right. You just put in 80% of your total coats.

We do it slightly differently and put all 100% in then build up a little pot of extra money to use later in the year when we have other things to pay out for!

You pay money into your account. The government top it up by 20%. You then pay the full amount to your childcare provider (£135) from that account.

How long does it take for the government top up to go in, for example if I made the payment on the Monday, would they have it topped up straight away or does it take a few days

The top up is paid in at the same time your monies hit the account. You have to pay the monies into an NS&I account.

It's pretty quick to top up but can take up to a week to move from your account to the childcarer's account so be mindful of that when you send payment. It's like the old BACS transfer, it doesn't complete on weekends or bank holidays.

How does this work? Do you withdraw the cash? You will only get the money that you put in. I suppose that would make sense if we could afford it! 🤦🏻‍♀️😂

@19annie86 Usually the gov top up bit is same day or sometimes has been day after.

So it pays to be organised with it all.

Then there is a section in your account where you can pay one off amounts to your Childcare provider or set up a regular payment. Which ever is best for you.

We do one offs. Then I pay money in randomly thru the month, as above. We pay in a bit more then other months have more in the ‘pot’ so don’t have to use as much of our own money for that bill.

you do get the top up at the same time as the cash clears in your childcare account. I set up standing order from my account to childcare account on payday and then transfer to childcare provider the day after.

@BrutusMcDogface No you don’t withdraw the cash.

It builds up so then you can use that towards a months nursery bill where you know you have a lot of expenses (Xmas/birthdays etc)

They'll have built up a buffer to pay for their childcare, leaving some extra money in the budget for other expenses.

Exactly what others have said however remember that there is a £500 limit every 3 months.
So if you divide £500 by 3 is £166.67 so your monthly bill can only be £833.33 before you won't benefit from the full 20% discount.
If your monthly bill is above this then you'll likely get the full 20% for 2 months and then every 3rd month you'll pay more.
At my sons nursery this would be if a child under 2 was doing 4 or more days so it's not as great as it sounds unfortunately.

@19annie86 I would pay monthly, you'll be constantly on the site moving money around.

No, we don't withdraw it.

The cash pot builds up and then we use it to pay for childcare that month and use 'normal money for e.g. birthday presents.

I know we could just use a savings pot but I have zero restraint and it would get spent!

This.

Our DD goes full time so we get the full 20% month one and two then only have about £70 left of the £500 month three. Then it re-sets.

Omgosh @Pinkflipflop85 , how dim am I?! 😂 Sounds like a great way to budget!

I get round that 3 month problem by having multiple children! 😜

When u talk about the £500 limit per 3 months, does this mean the max the government will top up over 3 months is £500, sorry for silly question, this all new to me

Yes, £500 per 3 month period, you have to re-confirm your details every 3 months and then it resets. Quite frustrating as it's per child, we don't have enough to cover DD3 by month 3 but DDs 1 & 2 have an excess as wraparound care isn't has high! Would be helpful to have it as a family pot rather than per child!

@19annie86 yes that's right.

omg this all sounds so confusing and I’m a little overwhelmed by it all to be honest!!!

@Sanch1 I'm quite interested in how we could make this work... DC2 is at nursery at the fess are more than £2000/quarter so we max out on the amount we can receive and pay 100% of the costs over & above.

DC1 is now at school so we 'only' have to pay his school wraparound and holiday clubs.

I'm trying to work out if there is something smart we can do here but can't work out what!

We're on the cusp of it not being worth us both working so this could make the difference.

I dont think you can because you have to pay the provider directly from the child's account. Unless you got the nursery to accept money from another of your child's accounts, but that would unethical and expect some sort of fraud so illegal!

@Sanch1 Pretty much what I thought, thanks.

Do you know when the three month clock resets? Is it calendar or from when you first do it?

Can’t you set up dd3’s childcare as a payee on dds 1 and 2’s accounts?

No that's fraud... I wouldn't accept payment with the wrong child named on the reference.