UPDATE - Notional Offsetting, tax credits
HMRC delay transfer of tax credit debts to DWP
New DWP website : Understanding Universal Credit
Low Pay Commission consultation
UC passported benefits - Free School Meals (England) UPDATE
Universal Credit Passported Benefits - Free School Meals (England)
HMRC postal addresses: Using a courier
Universal Credit – miscellaneous amendments, including changes to the surplus earnings rules
Public Accounts Committee Report - HMRC’s performance 2016/17
Tax credit claim forms and UC roll-out
Welcome to our new Tax-Free Childcare guidance pages
Tax-Free Childcare: Help with claiming online
Tax-Free Childcare: Tax-Free Childcare debt
Tax-Free Childcare: Mistake, fraud and penalties
Tax-Free Childcare: Overpayments of Tax-Free Childcare
Tax-Free Childcare: Compensation and complaints
Tax-Free Childcare: Contacting HMRC
Tax-Free Childcare: Choosing between the schemes
Tax-Free Childcare: Other childcare schemes
Tax-Free Childcare: 30-hour free childcare
Tax-Free Childcare: Employer supported childcare
Tax-Free Childcare: Paying for childcare
Tax-Free Childcare: Paying into an account
Tax-Free Childcare: Backdating
Tax-Free Childcare: Closing an account
Tax-Free Childcare: Reconfirmation process
Tax-Free Childcare: Opening an account
Tax-Free Childcare: Managing a Tax-Free Childcare account
Tax-Free Childcare: Making a claim
Tax-Free Childcare: Changes of circumstances
Tax-Free Childcare: Entitlement periods
Tax-Free Childcare: How much is Tax-Free Childcare worth?
Tax-Free Childcare: Qualifying children
Tax-Free Childcare: Declarations of eligibility
Tax-Free Childcare: Claiming other childcare support
Tax-Free Childcare: Paid work
The claimant and their partner must both be in qualifying paid work on the date of declaration (or reconfirmation).
- National insurance number requirement
- What is paid work?
- Employed claimants
- Self-employed claimants
- Employment and self-employment
- Expected income vs. hours
- What counts as employed income?
- What counts as self-employed income?
- Treated as in qualifying paid work
Both the claimant, and their partner if they have one, must hold a National Insurance Number. The only exception to this is if the claimant's partner is resident and in paid work in another EEA country.
Paid work means work done for payment or in expectation of payment and does not include being engaged by a charitable or voluntary organisation, or as a volunteer, in circumstances where the only payment made is in respect of expenses.
Employment for TFC means 'engaged under a contract of service or in an office (including an elected office) or so engaged as a UK resident working overseas'. Where someone has accepted an offer of work on or before their declaration date and expects that work to start within the next 31 days they will still qualify. Similarly, where a person is on unpaid leave from work when they make their declaration, they will still be treated as employed if they expect to return to work within 31 says of their declaration date.
If the person is employed they will be treated as in qualifying paid work if their expected income for the specified period (which starts from the date they make their declaration or reconfirmation) to be equal to or above the relevant threshold.
For most people aged 25 or over, the threshold will be £1560 per 3 month entitlement period (if it contains 13 weeks).
The specified period is:
a) 3 months beginning with the date of the declaration of eligibility
b) Where the person has accepted an offer of work and expects to start within 31 days of the declaration date - 3 months beginning with the day on which the work is expected to start
c) Where the person is absent from work on unpaid leave and expects to return to work within 31 days of the declaration date - 3 months beginning with the day on which the person is expected to return to work.
The relevant threshold is:
The current NMW rates can be found on GOV.UK.
Daisha (age 30) and Peter (age 29) are married and have two children. Daisha makes her declaration of eligibility on 30 October 2017. Peter works full time (35 hours a week). Daisha works 30 hours a week but from 18 November, Daisha expects to reduce her hours to 10 a week. Peter's relevant threshold for the entitlement period is £7.50 x 16 hours = £120 x 13 weeks = £1560. His income is expected to exceed his threshold and so he is in qualifying paid work.
Daisha's relevent threshold is also £1560. Daisha calculates her expected income for the period as ((30 x £7.50 x 7 weeks) + (10 x £7.50 x 6 weeks)) = £2025. The fact that Daisha works only 10 hours a week in the last 6 weeks of the entitlement period is irrelevant. Of course, if she continues to only work 10 hours a week and expects to do so for the following entitlement period, she will not be in qualifying paid work when she reconfirms her eligibility.
Assume that Daisha from Example 1 actually worked 18 hours for 7 weeks and then 10 hours for 6 weeks - her expected income for the period would be £1395. This means Daisha would not meet the qualifying work requirement and therefore the couple will not be entitled to TFC top-up payments.
Self-employed for TFC purposes means 'engaged in carrying on a trade, profession or vocation on a commercial basis and with a view to profit, either on one's own account or as a member of a business partnership. This definition is different to both tax credits and universal credit.
Self-employed claimants who are in the first 12 months of their business (called the start-up period) can qualify without meeting any earnings threshold. This is similar to the start-up period in universal credit.
The 12 months starts from the commencement of the trade, profession or vocation. Only one start-up period is allowed every five years.
If the person is self-employed they will only be treated as in qualifying paid work if their expected income from paid work for the specified period (which starts from the date they make the declaration of reconfirmation) to be equal to or above the relevant threshold.
For self-employed people this means their threshold will be either £1560 (based on a 3 month/13 week period) or £6420 (based on a 12 month period - see below).
The specified period is 3 months beginning with the date of the declaration of eligibility.
The relevant threshold is:
The current NMW rates can be found on GOV.UK.
Self-employed claimants have a second opportunity to meet the qualifying paid work requirement. This was introduced because using the normal test explained above, self-employed claimants who have fluctuating incomes, might not qualify when looking only at a three-month entitlement period but would if you look at their annual income.
If they do not qualify under the normal test above - looking at their expected earnings over a three month period - then they can qualify if they expect their income for the tax year (12 months) in which the date of declaration falls to be greater than the relevant threshold.
Relevant threshold when using a 12 month expected income (rather than 3 months) has a slightly different definition when setting what rate of NMW to use.
Mark is a self-employed single parent (age 27). He makes a declaration of eligibility on 30 October 2017. As this is in the 2017/18 tax year, the 25 and over NMW rate of £7.50 applies as Mark was aged 27 on 6 April 2017 (at the start of the tax year). His relevant threshold will be £7.50 x 16 hours = £120 x 52 weeks = £6240.
Mark will be in qualifying paid work if he expects his income from self-employment to be £6240 or more in the 2017/18 year.
Denise is a self-employed single parent. She runs her own business as a wedding photographer - she is very busy during the summer months (averaging 8 - 10 weddings each month) with only 1 or 2 each month in the winter.
Denise applies for TFC on 31 October 2017. Under the standard test (explained above) Denise's relevant threshold for the entitlement period (3 months from 31 October 2017) is £7.50 x 16 hours = £120 x 13 weeks = £1560. However, due to a low volume of work over the winter, Denise only expects her income from self-employment to be £1200 for the entitlement period.
However, Denise can also be classed as in qualifying paid work if her self-employed income for 2017/18 will be more than £6240. As Denise had a busy summer, she expects her annual income to be £12000. Therefore she meets the test and will be in qualifying paid work for that first entitlement period starting on 31 October 2017.
Some people may be both employed and self-employed. Where that is the case, the first thing to establish is whether they can meet the tests set out above through either their employed income alone or their self-employed income alone.
If they cannot, then they can combine the earnings from both over the 3 months beginning with the date of declaration of eligibility (or, where appropriate, the 3 months beginning with the day on which the work is expected to start of the person is expected to return to work). It should be noted that the rules explained above that allow self-employed claimants to consider their income over 12 months in order to qualify does not apply when combining employment and self-employment.
TFC does not work using actual income figures and there is no end of year reconciliation exercise like there is in the tax credits system. Instead, TFC asks people to forecast their expected income for the next 3 months in most cases (12 for some self-employed people).
So what does expected mean? The Regulations simply say it is the income which the person has a reasonable expectation of receiving.
Until the system is established, it's hard to say how HMRC will police this, whether it will be subject to compliance checks and whether there will be any challenge to the 'reasonable expectation'.
What is clear is that if the person's actual income for the period turns out to be less than their threshold, HMRC cannot reclaim the TFC top-up automatically - they could only do so if they could show that the person's estimate of their expected income was not reasonable.
Any earnings that a person receives from any employment under a contract of service of any office, including an elected office, counts towards the threshold.
It is gross income that counts for TFC purposes - before any deductions for tax, national insurance or pension contributions.
Earnings are given the same meaning as in Section 62 ITEPA 2003. This includes:
- Any salary, wages or fee
- Any gratuity or other profit or benefit of any kind obtained by the employee if it is money or money's worth
- Anything else that constitutes an emolument of the employment
The last two bullet points ensure that all money payments that are similar to earnings are included - that includes bonuses, commissions, tips, overtime pay. It also includes non-cash earnings such as benefits in kind, for example, a company car or medical insurance.
Self-employed income unfortunately doesn't follow the tax system. It is calculated as:
(Amount of receipts) - (amount of expenses)
Receipts are those the person expects to derive from their trade, profession or vocation and expenses are those they expect to incur wholly and exclusively for the purposes of that trade, profession or vocation.
It is gross income that counts - before deductions of tax, national insurance and pension contributions.
If they are in partnership, then it is their share of the receipts less their share of the expenses.
Receipts and expenses of a capital nature are to be disregarded. Capital expenditure for tax is normally expenditure on long term assets, such as equipment or buildings, and normally capital allowances would be claimed. The cost is then charged to depreciation expense over the useful life of the asset.
Some people can be treated as in qualifying paid work even if they are not working. This means they are treated as in paid work and as having income equal to the earnings threshold.
In order for this to apply, the person must have been in qualifying paid work (or treated as if they were) immediately before the period they are:
- Paid statutory sick pay
- Paid maternity allowance
- Paid statutory maternity pay
- On ordinary or additional maternity leave
- Paid statutory paternity pay
- Paid statutory adoption pay
- On ordinary or additional adoption leave
- On shared paternal leave
Where a claimant, or their partner, are claiming TFC in respect of a child whose birth or adoption cause the period of leave, they will only be treated as in qualifying paid work for the last 31 days before they return to work. However, they would be treated as in paid work for the whole period of leave in respect of any other children they are claiming TFC for.
Self-employed claimants are also treated as in qualifying paid work during any period for which any of the bullet points above would have applied but for the fact that the work they did immediately before the period of leave was self-employment rather than employed under a contract of service.
Residents of other EEA countries who are in paid work in the UK who receive payments similar to those in the bullet points above or who are on similar periods of leave under the law of their own country are also treated as in qualifying paid work.
Where one member of a couple is in qualifying paid work and the other is paid or entitled to:
- Incapacity benefit
- Severe disablement allowance
- Long term incapacity benefit
- Carer's allowance
- Contributory employment and support allowance
- National insurance credits on the grounds of incapacity for work or limited capacity for work
The non-working member of the couple will be treated as in paid work so that they qualify for TFC.
For this exception to apply, there must be one member of the couple who is in qualifying paid work by meeting the relevant earnings threshold.
Zoisha and David have three children. Zoisha works 35 hours a week. David does not work as he is a full-time carer for his disabled mother. Even though David is not working and does not earn above the relevant threshold, he is treated as in paid work and so the couple can claim TFC support.
Note that there is a requirement for at least one member of the couple to meet the earnings threshold at all times.
Assume that Zoisha and David claim TFC from 31 October 2017, they are entitled to support for the first three month entitlement period because Zoisha is in qualifying paid work as she meets the earning threshold and David is treated as in qualifying paid work because he is entitled to carer's allowance.
The couple will be expected to reconfirm their eligibility for TFC for the next three month entitlement period. Zoisha has given up work because her own mother is ill and she has also claimed carer's allowance. The couple will no longer qualify for TFC because neither of them is in qualifying paid work by virtue of meeting the earnings threshold.
Self-employed claimants are also treated as in qualifying paid work during any period for which any of the bullet points above would have applied, but for the fact that the work they did immediately before the period of leave was self-employment rather than employed under a contract of service.
Residents of other EEA countries who are in paid work in the UK who receive payments similar to those in the bullet points above under the law of their own country are also treated as in qualifying paid work.
Tax-Free Childcare: Being in the UK
The claimant must, at the date of declaration, be in the UK. This section explains what 'being in the UK' means for TFC.
- What does 'being in the UK' mean?
- People treated as being in the UK
- People treated as not being in the UK
- Termporary absence from the UK
A claimant will meet this eligibility condition if they are in the UK on the date of the declaration. The UK is England, Scotland, Wales, Northern Ireland and adjacent islands, but not including the Isle of Man or the Channel Islands.
Therefore the basic rule is that claimants must be physically in the UK on the date of declaration (although temporary absences may be allowed).
There are no residence requirements for the child, but see our 'qualifying children' section for more details about the rules covering children.
Some people are automatically treated as 'being in the UK' even if they are not physically present. This will be the case if:
1. The claimant is ordinarily resident in the UK
Ordinary residence is not defined in the Regulations. For tax credit purposes HMRC states someone is ordinarily resident if:
'they are normally residing in the United Kingdom (apart from temporary or occassional absences) and their residence here has been adopted voluntarily and for settled purposes as part of the regular order of their life for the time being'
2. A crown servant or member of HM Forces posted overseas or their partner if they are accompanying them on that posting
A claimant is treated as posted overseas if they are performing overseas the duties of a Crown Servant or member of HM Forces and immediately before their posting (or the first of consecutive postings) they were ordinarily resident in the United Kingdom.
A Crown Servant means anyone who:
- Holds an office or employment under the Crown
- Whose duties of empoyment are of a public nature
- Whose salary is paid out of public funds in the UK
3. A resident of another EEA state who is in paid work in the United Kingdom
Some people are automatically treated as NOT in the UK for TFC purposes even if they are physically present here. This will be the case where:
1. The person is not ordinarily resident in the UK and is not in the UK for specified circumstances which are:
- a refugee
- a person who has been granted discretionary leave to enter or remain in the UK
- leave to remain under the Destitution Domestic Violence concession; or
- leave deemed to have been granted by virtue of the Displaced Persons (Termporary Protection) Regulations 2005
- a person who has humanitarian protection granted under the Immigration Rules
- a person who has been deported, expelled or otherwise removed by compulsion of law from another country to the UK but is not a person subject to immigration control
(In other words, those who fall into any of the above categories who are physically present in the UK will generally be treated as being in the UK for TFC purposes)
2. The person is resident in the UK but is taxed, under certain double taxation arrangements, as if they were not resident and they are not a resident of another EEA state in paid work in the UK.
3. The person is subject to immigration control (under s.115(9) of the Immigration and Asylum Act 1999)
Temporary absences can be ignored when determining whether a claimaint is in the UK.
Where the claimant is an eligible person immediately before the start of the temporary absence and the absence:
- Does not exceed 8 weeks; or
- Does not exceed 6 months and is solely in connection with the person (or their child or partner) undergoing treatment for an illness or physical or mental impairment under the supervision of a qualified practitioner; or
- Does not exceed 6 months and is solely in connection with the death of their partner or child (for whom they were responsible for); the death of their or their partner's/child's close relative; or
- Does not exceed 6 months and they are a mariner or continental shelf worker who is in a designated or prescribed area
For these purposes a close relative means a parent, parent-in-law, son, son-in-law, daughter, daughter-in-law, step-parent, step-son, step-daughter, brother or sister. It also includes the partner of any of those listed.
The requirement of being in the UK is only for the TFC claimant (the eligible person) - it does not apply to their partner.
However, in determining whether someone has a partner, if the partner is absent from the claimant's household at the date of declaration and this is expected to last more than 6 months, then they are not classed as a partner and should not be included on the claim. This is also the case if they are in prison. See our who is eligible section for more detail on who counts as a partner.
Our understanding of the legislation is that where the absence is less than 6 months, then the partner should be included on the TFC claim even if they are outside of the UK, because the 8 week rule above only applies to the TFC claimant. This is different to the rules in tax credits: for example, if a joint claimant goes overseas for more than 8 weeks (12 in certain circumstances) the joint claim ends and a single claim must be made.
Tax-Free Childcare: Responsibility for the child
The claimant must, at the date of declaration, be responsible for the relevant child as part of the eligibility conditions. In this section, we explain who is a relevant child and what responisbility means for TFC.
- Who is a relevant child?
- Being responsible for a child or young person
- Exceptions to the responsibility rules
- Children looked after by the Local Authority
Tax-Free Childcare (TFC) top-ups are paid per child. The claimant needs to be responsible for the child at the date of declaration. In this case, a relevant child simply means the child who the claimant is trying to open a childcare account for or a child who they already had an account on.
TFC can only be claimed for children who qualify, which means:
- Until the last day of the week in which the 1 September falls following the child's 11th birthday
- If the child is disabled, until the last day of the week in which the 1 September falls following the child's 16th birthday
We explain more about qualifying children in our 'qualifying children' section.
The basic test is that a person is responsible for a child if that child normally lives with the claimant.
A claimant will not be classed as responsible for a child during any period when the child is:
- Continuously absent from the person's household for a period which exceeds, or is expected to exceed, 6 months
- A prisoner
- Looked after by a Local Authority
- Placed for adoption (under certain legislation) by an adoption agency in the home of a person proposing to adopt the child
The regulations use the same meaning as that used in Section 22 Children Act 1989, Section 17(6) Children (Scotland) Act 1995, or Article 25 Childen (Northern Ireland) Order 1995.
A child isn't classed as looked after by the Local Authority for TFC purposes:
- During any period which is part of a planned short term break, or one of a series of such breaks, for the purpose of providing respite for the person who the child normally lives with
- During any period where the child is placed with, or continues to live with, the child's parent or a person who has parental responsibility for a child
A person has parental responsibility for a child here if they are NOT a foster parent and they have parental responsibility given under the Children Act 1989 (in England and Wales), under the Children (Scotland) Act 1995 (in Scotland), or the Children (Northern Ireland) Order 1995 (in Northern Ireland).
Tax-Free Childcare: Eligibility conditions
Tax-Free Childcare (TFC) top-up payments can only be made to someone if they are an 'eligible person' for each entitlement period. In order to be an eligible person, they have to meet 8 eligibility conditions. The eligibility conditions are different for the eligible person's partner. On this website we refer to the eligible person as the claimant.
- Confirming eligibility conditions are met
- The 8 eligibillity conditions:
- Partner's eligibility conditions
When an initial claim for TFC is made, the claimant will be required to make a 'declaration of eligibilty' which is a statement made by them for the entitlement period (usually three months) that they are an eligible person for that entitlement period. This requirement means that at the date of declaration, the claimant needs to confirm that they meet all 8 eligibility conditions outlined below. If they have a partner, they will need to confirm that their partner meets conditions 4 to 8.
They will need to reconfirm their eligibility every three months via their online childcare account. It is important that the claimant ensures their confirmation is accurate in respect of all the conditions otherwise they may find they have to repay their top-up payments. See out 'dealing with HMRC' section for more information.
Even if they meet all 8 conditions, if their partner does not, they will not be treated as an eligible person and so not entitled to a top-up payment. We explain who counts as a partner in our 'who is an eligible person' section.
Changes of circumstances
It appears from the legislation that the claimant need only confirm that they meet the eligibility conditions at the date of declaration - which is the day on which they make their declaration of eligibility statement that they are an eligible person for the entitlement period.
Any changes after that date will not affect the TFC top-up payments for the entitlement period, however if the change still exists when they are next required to re-confirm and make a new declaration for the next entitlement period, they may no longer be entitled to receive top-ups.
The claimant must be aged at least 16 at the date of declaration.
The claimant must, at the date of declaration, be responsible for the relevant child. The relevant child means the child who the claimant is trying to open a childcare account for or, if they are reconfirming their eligibility, that they already hold a childcare account for.
We explain what responsibility means in our 'determining responsibility of the child' section.
At the date of declaration, the claimant must be in the UK. See our 'being in the UK' section for more detailed information about what this means.
The claimant, and their partner, must be in qualifying paid work at the date of the declaration. There are situations where people can be treated as in qualifying paid work even if they are not. We explain what qualifying paid work is in our sub-section.
The claimant must expect to have adjusted net income of £100,000 or less for the relevant tax-year. In this case, the relevant tax year means the tax year in which the date of declaration falls.
Adjusted net income is explained on the GOV.UK website.
The general rule is that TFC and Universal Credit cannot be claimed at the same time. We explain more about this eligibility condition in our 'claiming other childcare support' section.
The general rule is that TFC cannot be claimed at the same time as childcare vouchers or directly contracted childcare support from an employer. We explain more about this eligibility condition in our 'claiming other childcare support' section.
The general rule is that TFC cannot be claimed at the same time as other childcare support payments towards the cost of childcare which are made out of funds provided by a National Authority. We explain more about this eligibility condition in our 'claiming other childcare support' section.
In order to be an eligible person, the claimant's partner must meet conditions 4 to 8 above. If they do not, the claimant will not be an eligible person and will not be entitled to receive a TFC top-up.
Tax-Free Childcare: Who is an eligible person?
TFC top-up payments can only be made to someone if they are an 'eligible person' for the entitlement period.
- Who is an eligible person?
- Who counts as a partner for TFC?
- Temporary absence
- Further guidance on deternining partner status
- Partners - Tax credits vs. TFC
A person is an eligible person for an entitlement period if:
- They meet certain eligibility conditions
- If they have a partner, the person's partner also meets certain eligibility conditions
The conditions that need to be met depend on whether you are considering the eligible person (the claimant) or their partner, as the table below shows:
|Eligibility conditions||Need to be met by an eligible person||Need to be met by claimant's partner|
|Being in the UK||YES||NO|
|Responsibility for the child||YES||NO|
|Receipt of other benefits||YES||YES|
We explain the requirements for each eligibilty condition if our 'eligibility conditions' section. In order to be an eligible person, the claimant's partner must meet conditions shown in column 3 of the table. If they do not, the claimant will not be an eligible person and will not be entitled to receive a TFC top-up.
For TFC, two people are regarded as partners at any time if they are both at least 16 years old at that time and either:
- They are married to, or civil partners of, each other and are members of the same household; or
- They are not married to, or civil partners of, each other but are living together as a married couple or as civil partners
Where two people are parties to a polygamous marriage, they are not regarded as partners for purposes of the Act if:
- One of them is party to an earlier marriage that still subsists; and
- The other party to that earlier marriage is living in the same household
A polygamous marriage means a marriage during which a party to it is married to more than one person and which took place under the laws of a country which permits polygamy.
Where a person's partner is temporarily absent from the household at the date of the declaration of eligibility (this is the date the person makes their declaration that they are an eligible person for the entitlement period and is part of the initial claim process and the ongoing re-confirmation process), they are not to be treated as a partner for TFC purposes if:
- The absence exceeds, or is expected to exceed, 6 months
- The absent person is in prison
At present, there is no published guidance on who counts as a partner for the TFC scheme. However, the definition is the same as that used for Universal Credit. The following guidance will be helpful on establishing if two people are living together as a married couple:
The definition of a partner for TFC is different to the definition given to a 'couple' in the tax credits system. This means it is possible that a single tax credit claimant, if they chose to claim TFC instead, could be treated as having a partner under the TFC system and vice versa - someone who is part of a couple for tax credits could be treated as a single person for TFC.
For tax credits, two people will be members of a couple (and required to make a joint claim) if they are:
a) a man and woman who are married to each other are neither -
(i) separated under a court order; or
(ii) separated in circumstances in which the separation is likely to be permanent,
b) a man and woman who are not married to each other but are living together as husband and wife,
c) two people of the same sex who are civil partners of each other and are neither -
(i) separated under a court order; or
(ii) separated in circumstances in which the separation in likely to be permanent,
d) two people of the same sex who are not civil partners of each other but are living together as if they were civil partners.
There is no 'same household' requirement in tax credits which meants that a married couple who live apart are still treated as part of a couple whereas under the TFC/UC definition, it is possible that they would be treated as living in separate households and therefore they wouldn't be classed as partners.
In TFC there is no separation under a court order or separated in circumstances likely to be permanent requirements.
In the majority of cases, the outcome will be the same for tax credits and TFC. However, advisers should be aware of the different definitions.
Tax-Free Childcare: Dealing with HMRC
Tax-Free Childcare: Tax-Free Childcare and other childcare support
Tax-Free Childcare: How does Tax-Free Childcare work?
Tax-Free Childcare: Who can claim?
This section of the website explains who can claim Tax-Free Childcare (TFC).
A person is only entitled to receive a TFC top-up payment for an entitlement period in respect of a child if:
- They are an 'eligible person' for the entitlement period
- They have made a valid declaration of eligibility for the entitlement period
- The child is a qualifying child
- They hold a childcare account in respect of the child
- A qualifying payment is made into the childcare account during the entitlement period
In this section you will find:
TFC can only be claimed by an 'eligible person' for an entitlement period. A person can only be eligible if they meet certain eligibility conditions and if they have a partner then their partner must also meet certain conditions. This section explains who is classed as a partner for TFC purposes.
There are several eligibility conditions that need to be met in order to be eligible for support from TFC. Some have to be met by the claimant and some by the claimant and their partner. This section explains the conditions and gives further detail on the rules around qualifying children, paid work and the requirement not to have childcare support from certain other schemes.
This section explains what a declaration of eligibility is, how and when a declaration is made and what happens when someone makes a late declaration.
This section explains who counts as a qualifying child and when a child will be classes as disabled for TFC purposes in order to be eligible for a higher level of support.
Tax-Free Childcare: Guidance
Tax-Free Childcare (TFC) is a new scheme that has been introduced gradually throughout 2017 and 2018. Roll-out of the scheme completed in February 2018. It was originally supposed to start in October 2015 but due to legal action was delayed.
TFC is the Government’s new way of providing childcare support to parents and it will eventually replace directly contracted childcare and childcare vouchers currently offered through employers (these schemes are often referred to as Employer Supported Childcare – ESC).
TFC is a UK wide scheme covering England, Scotland, Wales and Northern Ireland. The scheme runs through an online account which claimants can pay into to cover the cost of childcare for qualifying children with a registered provider.
For each 80 pence that is paid into the childcare account, the Government will pay in 20 pence up to a maximum of £500 (£1,000 of for each child that is disabled) of Government support per three month entitlement period. This means that recipients of TFC can receive up to £2,000 support per child per year and £4,000 per child if the child is disabled.
There are some important points to note about the TFC scheme:
- Children are only covered by the scheme up until the last day of the week in which the 1st September following their 11th birthday falls. If they are disabled then this is extended to their 16th birthday.
- The scheme is designed to be ‘digital by default’ and so claims are made and managed online with other options available for those who cannot make online claims
- In order to get support from the TFC scheme the claimant (and their partner) need to meet a minimum earnings requirement from paid work. The scheme is open to employed and self-employed people. See our paid work section for more details.
- Once an initial claim is made, claimants will be required to make a new declaration (reconfirmation) every 3 months.
- Those with adjusted net income over £100,000 a year cannot claim
Perhaps the most complicated part of the TFC scheme is how it works alongside other childcare support schemes. At present the main Government childcare support is offered through:
- Employer supported childcare (childcare vouchers, directly contracted childcare and workplace nurseries)
- Working tax credit (childcare element)
- Universal credit (childcare element
In addition, some children are entitled to 15 hours free childcare (extended to 30 hours for qualifying people) and other support may be available, for example if you are a student.
Once TFC is fully rolled out, no new claims for childcare vouchers (or directly contracted childcare) will be possible via employers. This is expected to be from April 2018. Existing claimants will be able to continue receiving that support as long as it is offered by their employer.
In addition, there is no entitlement to TFC if a person claims tax credits (any tax credits, not just the childcare element of working tax credit) or universal credit. If a claim for TFC is submitted, then the whole tax credit award will stop automatically.
Some people will be better off claiming TFC than tax credits or universal credit. Similarly some people may be better off claiming TFC than childcare vouchers. However, some people will be better off staying on the other schemes.
The decision about whether to claim TFC and leave an existing scheme is a complicated and important decision. This is especially the case if the claimant lives in certain areas where the universal credit full service has been rolled out.
It is important to look at which scheme is best based on current circumstances but also taking into account future changes that might be known at the time. Only people who are certain that TFC is best for them should make a claim, especially if they are in receipt of other childcare support.
See our TFC and other childcare support section.
You can find out more about TFC by using the navigation on the left hand side. We have sections that explain:
- Who can claim TFC - This section explains the roll-out of TFC, who is an eligible person, how a partner is defined for TFC, the eligibility requirements for claiming, what is meant by paid work and which children qualify for support.
- How does TFC work? - This section explains how TFC entitlement periods work, how much a claimant will get through the scheme, how to claim and manage an account, how and when payments can be made out of the accounts, what counts as qualifying childcare and issues around closing an account.
- TFC and other childcare support - This section explains how TFC interacts with other childcare support schemes including tax credits, universal credit, housing benefit, 15/30 hour free childcare and employer supported childcare (childcare vouchers). It also gives some guidance on choosing between the schemes.
- Dealing with HMRC - This section outlines how to contact HMRC, how overpayments of TFC occur and can be recovered, how to complain, appealing a TFC decision, contacting HMRC about TFC and dealing with compliance checks and penalties