Tax-Free Childcare update: Almost 12,000 families in Northern Ireland now saving money on childcare through Tax-Free Childcare

There are a number of forms of support available towards registered childcare costs, one of which is Tax-Free Childcare. Over the years the uptake for Tax-Free Childcare has been low in Northern Ireland. However, over the last year there has been a significant increase – of around 14.5% – in the number of families claiming support through the scheme. This was the highest increase in Tax-Free Childcare users across the UK.

Figures recently released by HMRC show that 11,910 families in Northern Ireland were using their Tax-Free Childcare accounts in December 2023, this is an increase of 1,505 over the year. These accounts have been used to pay for childcare for total of 15,385 children, which is an increase of 14.2% since December 2022.

While a positive development, we know that there are many more families who are still missing out on financial support with childcare they could be entitled to, or who could be benefitting more from another form of support. A quarter of parents who responded to the most recent Northern Ireland Childcare Survey told us they weren’t claiming any financial support with their childcare costs, reflecting the need for a widespread information campaign to encourage all parents to find out what support they are entitled to.

There are a range of support schemes available to help with registered childcare costs including Tax-Free Childcare and Universal Credit (available to new claimants) and Childcare Vouchers and Tax Credits (no new applicants allowed). What is best for your family will depend on your circumstances and the Family Benefits Advice Service can help you work this out – call 028 9267 8200 to speak with an advisor.

Families in Northern Ireland are currently receiving letters informing them that they must move from Tax Credits and other benefits onto Universal Credit. It’s important not to move to Universal Credit until you are advised to do so – this process is known as ‘managed migration’ and will help ensure you are not worse off by moving to Universal Credit.

What is Tax-Free Childcare?

The Tax-Free Childcare scheme allows eligible working families to claim 20% of their registered childcare costs, up to £2,000 per child per year, or £4,000 for a child with a disability, from HMRC.

To claim Tax-Free Childcare, both parents need to be in employment (or one person in a single parent household), earning between £167 per week, rising to £183.04 in April 2024 (equivalent to 16 hours working at the National Living Wage) and £100,000 per year each. So, for example, a household where each parent is earning £95,000 (combined income of £190,000) would be eligible.

Tax-Free Childcare is also available to self-employed parents (where eligible). Households where one parent is working, and the other parent is in receipt of Carer’s Allowance or certain disability benefits can also qualify.

The scheme is open to parents of children under the age of 12 (or age 17 for children with disabilities).

Savings are not taken into account in determining if a parent is eligible for Tax-Free Childcare.

For more detailed information you can download our Comprehensive Guide to Tax-Free Childcare here.

Increase to support available through Tax-Free Childcare needed

Employers For Childcare has been campaigning for an increase in the level of support available through the Tax-Free Childcare scheme from 20% to 30% to provide more assistance to hard-pressed families with their childcare costs. We are also calling on HMRC to remove the cap of £2,000 per child, per year, which was set when the scheme was originally introduced in 2017, and has not been increased since, despite the significant rise in childcare fees over this time. Read more here.

Further information

We would encourage all parents to make sure they are receiving all the financial support they are entitled to with their childcare costs, and to check regularly that they are receiving the best form of support for their family.

If you would like further advice on help with childcare costs or wish to find out more about what financial support you may be entitled to, contact our Family Benefits Advice Service for free, impartial and confidential advice. Call us on 028 9267 8200 or email – we are here to help.