A parent’s guide to Tax-Free Childcare: Savings, simplicity, and how to get started

As a parent or caregiver, you are likely to have an endless to-do lists, including those niggly little things you just keep pushing to the bottom of the list. You know what I mean… the tedious admin tasks, paperwork, signing up for this, cancelling that, etc. 

Let’s face it, signing up for government schemes like Tax-Free Childcare (TFC) can seem like yet another admin task that’s easy to put off. But if you’re looking for ways to save on childcare, it’s worth taking a few minutes to learn about the benefits and how to get started. 

So to make things a little easier for you, we’ve written this article as your 1-stop shop for everything you need to know about Tax Free Childcare, from how it will save you money to how you can get started.

What Is Tax-Free Childcare?

Tax-free childcare has been around for several years however, the Early Years Alliance (EYA) says, "Countless families are still unaware they are eligible to receive support, or that it exists at all, with a significant proportion still not taking advantage of the scheme."

 So, for any parents who feel a little out of the loop, let's get clear on what TFC is all about.

TFC is a government scheme that helps working families with the cost of childcare. Introduced in 2017, it replaced the old childcare voucher system and extended benefits to more families, including self-employed parents.

The main idea? For every £8 you put into a TFC account, the government adds £2, up to £2,000 per year, per child (or £4,000 if your child has a disability).

Sounds amazing, right? Well, it is! But, between filling out forms and setting up the right accounts, it’s no surprise that some nurseries shy away from offering it altogether. Well, through our integration ( which I’ll get into a little later) we’re here to help nurseries with all that hassle so you get to save on childcare costs.

Am I eligible for Tax-Free childcare?

To qualify for TFC, you and your partner (if you have one):

• Must each earn at least the National Minimum Wage for 16 hours a week? Each parent can earn up to £100,000 annually, and children are eligible until the 1st of September after their 11th birthday, or 16th if they have a disability.

Note: You can’t use TFC in combination with a Working Tax Credit, Child Tax Credit, Universal Credit, or childcare vouchers. However, ​​you can use Tax-Free Childcare at the same time as 15 or 30 hours free childcare if you’re eligible for both. 

Wondering which scheme suits your situation best? Use the childcare calculator to find the right support for you.

If you’re separated, keep in mind that TFC operates per child. You and your ex-partner will need to agree on who will apply, as only one of you can manage the account for each child. If you cannot decide, both of you can apply separately and HMRC will decide who gets a childcare account.

Haven’t signed up yet? It’s not too late. Check your TFC eligibility. 

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Get instant TFC payments

Famly does the work for you

See how

‍

Get instant TFC payments

Famly does the work for you

See how

What can TFC be used for?

TFC isn’t just for nursery fees. You can continue using TFC for costs like approved after-school clubs, holiday camps, and other registered childcare providers. Just make sure to check with the provider that they accept TFC payments. Don’t miss out on the chance to keep saving as your child grows.

How does Tax-Free Childcare work?

1. Set up an account: Create an online TFC account through the government’s childcare portal.
2. Deposit your funds: For every £8 you contribute, the government adds £2, so your £10 goes directly to your childcare provider.
3. Manage payments: Use the account to pay approved providers, such as nurseries, childminders, or after-school clubs. 

Confirm eligibility Every three months the government will ask you to reconfirm your eligibility, they’ll remind you but don’t miss the deadline otherwise you may not be entitled to claim the full £500 for the period.

A few tips for managing TFC Payments

• Calculate your deposits: To cover the full amount you owe to your provider, deposit 80% of your childcare bill into TFC. The government’s top-up will handle the rest.
• Automate payments: Childcare providers using Famly’s early childhood platform, make it easy to manage payments with direct transfers from your TFC account.
• Consider quarterly limits: If your monthly bill is higher than £830, remember the government cap of £500 every three months. You may need to adjust payments occasionally to stay within your budget.

How Famly makes TFC payments simple 

The TFC system may not be perfect, but our community insights are helping us make it easier for parents to navigate. 

At the end of the day, it’s about taking some of the stress off your plate so you can focus on what really matters, your children.

How Famly’s integration will make TFC easier for you and your child’s setting:

• TFC links directly to Famly: Once you’ve set up TFC in Famly, you never have to log into the HMRC portal again. All you have to do is top up your TFC account.
• Pay in one click: No hopping in and out of different accounts. You can pay directly inside Famly with one single click. 
• See TFC balance in real-time: You can view each of your child’s TFC balances, including funds cleared by HMRC, in real-time. 

Now you’ve got all the info, if you haven’t already it might be the perfect time to check your eligibility for Tax Free childcare and start saving! 

Are you already using TFC? Head over to our TFC for parents page to find out more about how Famly’s TFC  integration can save you time.