Self-employed tax-free childcare – how to apply

Did you know that you may be eligible for tax-free childcare as a small business owner?

While some government childcare schemes aren't 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 a year for each 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. This must be done through a tax-free childcare online account.

You may also be able to get 30 hours' free childcare – a scheme which has been expanded in the Spring Budget. Currently parents living in England may be able to get 30 hours a week of free childcare if their child is aged three or four.

Tax-free childcare for the self-employed – eligibility

Self-employed people are eligible for tax-free childcare just like employees.

Eligibility depends on:

• whether you're currently working
• your income (and partner's income, if you have one)
• your child's age and circumstances
• your immigration status

To be eligible, over the next three months you and your partner (if you have one) must each expect to earn at least:

• £1,976 if you’re aged 23 or older
• £1,909 if you’re aged 21 or 22
• £1,420 if you’re aged 18 to 20
• £1,000 if you’re younger than 18 or an apprentice

This works out as at least the national minimum wage for at least 16 hours a week, on average.

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

If you're newly self-employed (within the last 12 months) then you can earn less and still be eligible for tax-free childcare.

Additionally, your child must be 11 years old or younger, and they must live with you most of the time. You can't claim tax-free childcare for foster children, but you can for adopted children.

If your child is disabled, the amount you may be entitled to increases to £4,000 a year until they are 1 September after their 16th birthday.

To qualify for this extra amount, the child must be getting Disability Living Allowance, Personal Independence Payment, Child Disability Payment (in Scotland), or Adult Disability Payment (in Scotland).

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.

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.

More small business guides and resources

• We need more women small business owners
• A guide to self-employed maternity pay
• Empowering Women in Business initiative
• What type of business insurance do I need?