Martin Lewis warns 300,000 homes are missing out on a £2,000 childcare payment

Welcoming a child into the world isn’t cheap. In fact, the cost of raising a child to age 18 in the UK is about £260,000.

And with parents now paying an average of over £7,000 per year, for just a part-time nursery place, according to NCT, childcare is a big drain on the finances.

But Money Saving Expert Martin Lewis has warned that 300,000 homes could be set to miss out on up to £2,000 per year of extra cash from the government to soften the blow.

‘Tax-free childcare’ is a scheme that offers a ‘top-up’ to help working families afford care costs.

Martin is currently campaigning for the government offering to be renamed to the ‘Working Family Childcare Top-up’ scheme, as he believes the current name is misleading since it’s not actually tax-free.

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Essentially you pay money into an online childcare account, which can only be opened by one parent.

The state then adds 25% to the amount you pay in. So if you paid in £8 for childcare, the government should add £2 that same day.

The maximum toy can get added is £500 every three months, or £1,000 for some children with disabilities. So, essentially the average family could claim about £2,000 per year.

This scheme is only available for children under 12 (specifically up until the September after their 11th birthday), or if your child has a disability, up until the September after they turn 16.

You must be considered a working family, which means both you and your partner (if you live with them) must be employed or self-employed.

You may still qualify if you’re on sick or parental leave, or on certain benefits like a Carer’s Allowance or an Incapacity Benefit because you can’t work. So, it’s worth checking.

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There’s then a minimum earning requirement of roughly £10,500 a year if you’re over 21, basically the equivalent of 16 hours work a week at minimum wage.

And, you also can’t earn more than £100,000 per year of adjusted income (taxable income deductions tax reliefs or pension contributions). If you’re a couple, you both must earn less.

Your childcare provider will also need to be an establishment that takes payments from Tax-Free Childcare, so make sure you double check.

Where many parents slip up with the Tax-Free Childcare scheme is that you need to reconfirm you’re eligible four times a year.

It sounds annoying but Martin claims the process is quick and simple, and you’ll be given timely reminders when you’re due.

If you don’t reconfirm by your deadline, and your childcare bill is due, you’ll have to pay the amount in full without the top-up from the state.

If you tick all the boxes you can head to the Government Tax-Free Childcare site and set up your account, which should take about 20 minutes.

You’ll need your national insurance number, and if you’re self-employed you’ll also need your unique taxpayer reference.

Both parents can use the account, although it can only be in one person’s name, so make that decision amongst yourselves.

Once you’re good to go, all you do is pay in money by setting up a standing order or a single payment from your bank using a debit card. You can’t do a direct debit, but on the bright side, grandparents or anyone else you wish can also pay money in.

You can use the money to pay your childcare provider as soon as your account shows ‘available funds’. Simply choose your provider and transfer the money via your Tax-Free Childcare account.

Transfer it before 2.30pm if you want the best chance of the money arriving with your childcare company that same day, otherwise it may be the next working day.

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