Tax-Free Childcare for the Self-Employed

The Tax-Free Childcare system is available to self-employed parents, to help them with support for childcare costs. 

If you are self-employed and meet the criteria of the scheme you could be eligible for a government contribution of up to £2,000 a year to put towards your childcare costs.

What is Tax Free Childcare

The tax-free childcare scheme is not dependant on being provided by an employer unlike other childcare schemes such as childcare vouchers. 

Eligible parents need to open up an online Childcare account and receive £2 top-up from the government for every £8 they put in – that’s potentially worth £2,000 per year per child. 

In other words, the government are giving a 20% top up which is the tax rate that most people in the scheme pay.

Eligibility for Tax-Free Childcare

Here is the criteria to be check if you are eligible to join the Tax-Free Childcare scheme:

  • Children must be under the age of 12 (or 17 years old for children with disabilities);
  • Parents need to be in work earning at least £120 a week;
  • You’re not eligible if either you or your partner has a taxable income over £100,000 per year;
  • Your childcare provider must be signed up to the scheme before you can pay them and benefit from Tax-Free Childcare.

Newly Self Employed Individuals Start Up Period

To further support those parents who are newly self employed the government is introducing a ‘start-up’ period. During the start up period parents do not have to earn the minimum income level of £125.

The start up period will be around 12 months and parents will be able to access one start up period every five years.

How to Apply for the Tax Free Childcare

You need to open up online Childcare account which you can do here

You’ll need your details (and your partner’s, if you have one), as well as your:

You’ll then need to pay your childcare contributions into this online account as you wish, the government will make their top up into it and then you can begin making payments to your approved Child Care Provider. 

You’ll need to re confirm your eligibility every 3 months but you’ll be prompted to do this within your Childcare Account.

Find an approved Child Care Provider here.

Tax Free Childcare and Tax credits, Universal Credit or Childcare Vouchers

You cannot join the Tax-Free Childcare Scheme as well as claiming Working Tax Credit, Child Tax Credit or Universal Credit.

These will stop as soon as you are accepted into the Tax-Free Childcare Scheme.

Withdrawing from your Tax Free Childcare Account

If you need to withdraw money because your circumstances change, then you can take out any money you have put in.

But the government will withdraw its corresponding contribution.

Updated 17 April 2019

Anita Forrest
About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - a UK small business finance blog where she shares help and advice with the self-employed community to make topics like registering a business, bookkeeping and taxes easy to understand.