Tax-Free Childcare accounts can provide parents with an additional £500 every three months for each child being raised. This could generate thousands of pounds of extra income throughout the year.
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This extra support for childcare could be very useful at the moment as coronavirus has impacted income and families are adjusting to a new normal of mixed up work schedules.
However, insight from Royal London has shown that there has been a sudden reduction in usage.
According to findings from their FOI request, the average unused balance before the lockdown commenced was £83.75 per account.
The latest statistics on the use of Tax-Free Childcare accounts published today show that 218,000 families had used tax-free childcare accounts in March, down from a high of more than 220,000 in January.
This drop in usage worried Rebecca O’Connor, a Personal Finance Specialist at Royal London, who urged families affected to check on their balances: “There were fewer parents paying for childcare using tax-free childcare accounts in March, as nurseries and childminders closed their doors at the beginning of lockdown and children were required to stay at home.
“We are urging parents to check whether they have an unused balance in their tax-free childcare account.
“If they do not need to pay for childcare imminently, withdrawing any unused balance and putting back in their current accounts could help the family finances.”
The lockdown rules will have impacted what this benefit can be used for as it is primarily aimed for school themed caring facilities but this limitation may be ending soon.
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The government have been discussing the prospect of reopening schools in recent weeks, meaning the money from this account could soon be put to its intended use.
However, even if it is not possible to use it for this purpose there is broad scope on what the state will award money for.
The bonuses can be used for “approved childcare” which is not exclusive to schooling services, it can also be used for childminders or home care workers among others.
Eligibility for the account and its bonuses will depend on if the holder is working, how much they earn, the child’s age and circumstances and the holder’s nationality.
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A person will usually get Tax-Free Childcare if they (and their partner if they have one) are:
- In work
- On sick leave or annual leave
- On parental, maternity, paternity or adoption leave
The government points out that if a person’s working pattern has changed because of coronavirus, they may still be able to get Tax-Free Childcare.
If a person receives this benefit they will be expected to earn a certain amount over the three months following the application.
This amount will be at least the National Minimum Wage or Living Wage for 16 hours a week on average.
The child being claimed for must be 11 or under and usually live with the claimant.
Anybody living outside of the EEA will not be eligible for the scheme.
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