Childcare - Frequently Asked Questions -general

Contents

Q. How is the law for tax credits and childcare in England changing?

A. From 1 October 2007, in England, childcare or over seven clubs approved by one of the following Quality Assurance Schemes will no longer qualify you for the childcare element of working tax credit:

  • Aiming High
  • Flying High
  • For one child and all children
  • Growing in Quality
  • Merits of Quality Play
  • Norfolk Quality Kitemark
  • Quality for All
  • Quality in Play
  • Star Quality Assurance

If you use childcare or an over seven club approved by one of these schemes or any other Quality Assurance Schemes, you need to check that your childcare or club has registered with Ofsted.

To get tax credits for childcare costs, you must use registered or approved childcare. Some providers have to renew their registration each year. Ask to see their registration or approval certificate from time to time to check that it is still valid. Whatever the age of your child, if you use a provider who is not registered or approved you may be asked to pay back the money you have had.

More information about childcare providers is available. If you are concerned that your provider may no longer be registered or approved, please see the childcarelink website or call 08000 96 02 96.

Q. If I claim help with my childcare from the Department for Children, Schools and Families (DCSF), can I continue to receive help with childcare through tax credits?

A. No. If you receive help to cover the cost of childcare from DCSF then you are not entitled to also receive help with your childcare costs through tax credits. Please telephone the Tax Credits helpline asap to let us know if you begin to receive help from DCSF towards your childcare costs.

Q. What happens when my child is on school holidays and I do not pay any childcare fees?

  • If you pay your childcare charges weekly

A. Your average costs should be worked out by taking the total amount you have paid for childcare in the last 52 weeks and dividing that by 52 (this would include taking account of any increases in costs you had during the school holidays or at any other times and it can include weeks when you did not pay anything for childcare).

If it is less than 52 weeks since you started using childcare you should work out what you expect to spend on childcare in the next 52 weeks and divide that by 52

Example
You normally pay £40 a week for childcare. However in the Easter Holidays (2 weeks), Summer Holidays (6 weeks) and the two half-term holidays (one week each) you pay £120

You work out your average weekly costs as follows:

(10 x 120) + (42 x 40) = Total Costs of £2880
divided by 52
= average weekly costs of £56 (always round the average up to the nearest pound)

Example
You do not pay for childcare during term time. In the Easter holidays you pay £60 per week to an approved playscheme. The scheme runs for 2 weeks. You do the same in the half-term breaks (one week each) and the summer holidays (7 weeks) and also use the scheme for one week at Christmas.

Your average weekly costs are worked out as follows:

(12 x 60) + (40 x 0) = total costs £270
divided by 52
= average weekly costs of £14

  • If you pay your charges monthly

Your average costs should be worked out by taking the total amount you have paid for childcare in the last 12 months and dividing that by 52 (this would include taking account of any increases in costs you had during the school holidays or at any other times and it can include months when you did not pay anything for childcare).

If it is less than 12 months since you started using childcare you should work out what you expect to spend on childcare in the next 52 weeks and divide that by 52.

Example
You pay for childcare monthly but the amount you pay varies from month to month. Your monthly payments in the last 12 months were:

April £240
February, October and December £200
July and August £320
All other months £160

You work out your average weekly costs as follows:

240 + (3 x 200) + (2 x 320) + (6 x 160) = total costs £2440
divided by 52
= weekly average costs of £47

Q. Can I get an advance for my childcare costs?

A. No. Childcare costs are an element of tax credits and tax credits are not payable in advance.

Q. My child's nursery place is free. I have to pay the nursery for their food/meals. Can I claim this as a childcare cost?

A. Yes. We would allow 80 per cent of these payments as childcare costs.

Q. How will the help towards childcare costs be paid?

A. If you are entitled to receive the childcare element of Working Tax Credit, it will always be paid alongside payments of Child Tax Credit, direct to the person who is mainly responsible for caring for the child or children. It does not have to be paid to the person who receives Working Tax Credit. It will be paid weekly or 4-weekly, depending on how often you have chosen to receive payments of Child Tax Credit.

Q. I use vouchers towards the cost of my childcare. Do I need to deduct the value of the vouchers when giving details of my childcare costs?

A. Yes. You should deduct the amount of the voucher from your total childcare charges and only tell us the amount that you actually pay for. For example, if your total childcare charges are £50 a week and you receive vouchers to the value of £20 a week, you should tell us that you pay childcare charges of £30 a week.

Q. Will I be better off accepting childcare vouchers in return for a salary sacrifice or by claiming tax credits help towards my childcare costs?

A. You cannot claim tax credits help for childcare costs met by your employer or with childcare vouchers. We are currently developing further guidance to help you to work out if you will benefit from tax and National Insurance savings from employer-provided childcare support if you receive tax credits. This will be added to this page as soon as it is available.

Your family will generally be better off accepting childcare vouchers in return for a salary sacrifice if you can answer “yes” to one or more of the following:

  • Your eligible childcare costs are more than £175 per week if you have one child or £300 per week if you have two or more children. In this case you will always be better off accepting childcare vouchers to cover your childcare costs above these limits.
  • You are receiving tax credits at the family element (£545 per year, or £1090 per year if you have a baby aged under one) or less and you are claiming for your childcare costs.
  • You pay tax on your earnings at the higher rate of 40 per cent.

Your family will generally be worse off or, at best, no better off accepting childcare vouchers in return for a salary sacrifice if you can answer “yes” to all of the following:

  • You are receiving tax credits of more than £545 per year (or £1090 per year if you have a baby aged under one) and you are claiming for your childcare costs.
  • You do not pay tax on your earnings at the higher rate of 40 per cent.
  • Your eligible childcare costs are no more than £175 per week if you have one child or £300 per week if you have two or more children.

For further information:

  • Childcare article
    This link will direct you to a recent HMRC news article on this subject.

Q. A family member looks after my child(ren), will I be entitled to the childcare element of Working Tax Credit?

A. You will not be eligible for help from the Working Tax Credit childcare element if the childcare is provided by:

  • a relative of a child caring for that child in the child’s home, even if the relative is ‘registered’ or ‘approved’ or
  • a relative approved’ under the:
    • Childcare Approval Scheme in England
    • Approval of Childcare Provider in Wales
    • Registration of the Childcare Providers Scheme in Northern Ireland

caring for a child or children, away from the child’s or children’s home and the care is solely for a child, or children, to whom the provider is related.

Q. Can I claim help towards childcare costs for a new born or newly adopted child whilst either my partner or myself are off work?

A. Provided all the other conditions for claiming relevant childcare are met and the absence from work is due to:

  • Maternity leave
  • Paternity leave
  • Adoption leave

Running from the date of the child's birth or placement for adoption with you, you can claim for help with the childcare costs.

Q. My childcare costs do not start until next week, can I tell you about them now?

A. You can claim for relevant childcare even if it has not yet started, provided:

  • you have entered into an agreement for the provision of childcare that will start in the next seven days and
  • you will make payments for that childcare during the period of the award of tax credits.