30/01/2025
Understanding Tax-Free childcare: A smart way to save on childcare costs
Childcare can be a significant expense for working parents, but the good news is that the UK government offers financial support through the Tax-Free childcare scheme. This initiative helps parents save money on childcare costs, making it easier to manage expenses while ensuring children receive quality care.
As Martin Lewis Money points out in this article from Money Saving Expert, it could well be the confusing name which is misleading parents and leading to many parents missing out on significant savings. Tax-Free childcare isn't actually to do with tax, or linked to the tax rate you pay. What it actually is is a discounted childcare savings scheme where you can save and receive a 25% top-up from the government.
We hear from our parents that this can be confusing, so we're here to help! Read on for the low-down on Tax-Free childcare and how this can help your family budget.
What is Tax-Free childcare?
Tax-Free childcare is a government-backed scheme designed to support working parents by reducing the cost of childcare. For every £8 you pay into your online childcare account, the government adds £2, up to a maximum of £2,000 per child per year (£4,000 for disabled children).
Key benefits of Tax-Free childcare:
- Available to all eligible working parents in the UK
- Supports children under 12 years old (or under 17 if disabled)
- Flexible use across Ofsted-registered childcare providers
Tax-Free childcare vs Childcare Vouchers: What’s the Difference?
While both schemes offer financial relief, they operate differently. Below is a breakdown to help you determine which is best for your situation.
Availability
- Tax-Free childcare: Open to new applicants
- Childcare Vouchers: Closed to new applicants since October 2018, but existing members can continue if their employer still offers it
Savings potential
- Tax-Free childcare: The government adds £2 for every £8 you contribute, up to £2,000 per child per year (£4,000 for disabled children)
- Childcare Vouchers: Parents can save up to £243 per month tax-free through their employer, reducing taxable income
Eligibility criteria
- Tax-Free childcare: Both parents (or a single parent) must be working and earning at least the minimum wage, but not exceeding £100,000 per year
- Childcare Vouchers: Available only to those who joined before October 2018 and remain with an employer that offers the scheme
Where can you use them?
Both schemes can be used for Ofsted-registered childcare, including:
- Nurseries
- Childminders
- After-school and holiday clubs
Which scheme is right for you?
Choosing between Tax-Free childcare and Childcare Vouchers depends on your circumstances.
Tax-Free childcare is generally better if:
- You are self-employed
- You have higher childcare costs
- You have multiple children
Childcare Vouchers may be better if:
- You have lower childcare costs
- Only one parent works
- Your employer still offers the scheme
Using Tax-Free childcare for school holiday activities
School holidays can be challenging for working parents, but Barracudas offer an exciting and safe environment for children during breaks. The good news? You can use Tax-Free childcare (or Childcare Vouchers) to cover the costs!
Here's the key questions we get from parents, and handy answers!
How to pay with Tax-Free childcare
- Set up a Tax-Free childcare account through the HMRC website
- Pay into your account
- Search for ‘Barracudas’ as a registered provider
- Make a payment directly from your childcare account
- The government will top up your payment, reducing your overall costs!
Why Choose Barracudas?
Barracudas is a leading provider of UK school holiday camps. Operating for over 30 years, we're as committed as we ever were to providing children with fun and enriching experiences in the school holidays. With over 1,600 independent parent reviews on Trustpilot and an excellent rating, you can be reassured they'll be in safe hands and living their best lives at Barracudas camp!
- Over 80 fun activities
- A choice of activities for each of our 6 daily sessions
- Fantastic venues with amazing facilities
- Ofsted-registered, meaning you can use your Tax-Free childcare account
- Enhanced DBS checked and fully trained staff
- Flexible booking options to fit around your work schedule
- Full day of activities from 8.30am to 5.30pm
- Extended hours with Early & Clubs from 8am to 6pm
- Flexible payment options
Start saving today!
Tax-Free childcare is an excellent way to reduce your childcare expenses while ensuring your children have access to high-quality care and activities. If you’re looking for a fun and enriching experience for your child during school holidays, Barracudas is a fantastic option – and with Tax-Free childcare, it’s more affordable than ever!
For more information, visit Barracudas Activity Camps and start planning your child’s next adventure today!