Self-employed Tax-Free Childcare - how to apply

Self-employed people may not realise that they are eligible for Tax-Free Childcare.

While some government childcare schemes are not available to the self-employed, you may still be able to claim Tax-Free Childcare. Here, we explain the eligibility guidelines for the scheme, along with how to apply.

What is Tax-Free Childcare?

Tax-Free Childcare is a scheme operated by the government to provide financial support for new parents with children in childcare.

Parents can receive up to £2,000 per year per child to help with the costs of childcare. If you qualify, the government will pay £2 for every £8 you pay to your childcare provider, on the proviso that this is done through your Tax-Free Childcare online account.

Tax-Free Childcare for the self-employed – eligibility

Self-employed people are eligible for Tax-Free Childcare just like employees. In fact, the eligibility criteria are less strict for the newly self-employed – you don’t need to meet the £120 a week earnings limit if you started your business less than 12 months ago (your start-up period).

However, if you’re on parental leave, you cannot apply for Tax-Free Childcare for the child you are currently on leave for.

In order to be eligible for Tax-Free Childcare you must be in work, or getting parental leave, sick leave, or annual leave. You (and, if applicable, your partner) must be earning at least the National Minimum Wage for at least 16 hours per week, but this earnings limit does not apply to the newly self-employed, as above.

You can average your self-employment income across the year to meet the minimum income criteria, providing you aren’t also getting employment income.

Additionally, your child must be 11 or under, and they must live with you most of the time. Foster children are not eligible for Tax-Free Childcare, but you can claim for adopted children. If your child is disabled, the amount you may be entitled to increases to £4,000 per year until they are 17.

To qualify for this extra amount, the child must be in receipt of Disability Living Allowance, Personal Independence Payment, or the Armed Forces Independence Payment, or must be registered blind or severely sight-impaired.

Can the self-employed get childcare vouchers?

Childcare vouchers are generally provided through a scheme operated by employers. They allow new parents to take up to £55 per week of their salary as vouchers, and employees do not pay National Insurance on this amount.

Childcare vouchers are not available to those who have successfully applied for Tax-Free Childcare. However, as the schemes are operated by employers, they do not apply to the self-employed anyway.

Tax-Free Childcare and other benefits

You can’t claim Tax-Free Childcare at the same time as Working Tax Credit, Child Tax Credit, or Universal Credit. If you successfully apply for Tax-Free Childcare, your Working Tax Credit or Child Tax Credit will stop immediately, but the government says you should apply for Tax-Free Childcare before you cancel your Universal Credit.

It can be confusing to determine which scheme you’re better off on. To help with this, you can use the government’s childcare calculator here.

How do I apply for self-employed Tax-Free Childcare?

You’ll need to apply online for Tax-Free Childcare if you’re self-employed. The process takes around 20 minutes. You’ll need your National Insurance number and your Unique Taxpayer Reference, along with those of your partner if applicable. Some eligibility applications are settled immediately, but it can take up to seven days.

Apply for self-employed Tax-Free Childcare here.

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