Parents missing out on government scheme that could save up to £2,000

Many parents are missing out on a scheme that could save up to £2,000 a year for each child, a payroll specialist says. Robert King, director of nanny payroll services at Nannywage Ltd, is encouraging parents to make use of the lesser-known facility.

And he said it could save them hundreds on childcare costs this summer, reports . Robert said: "The Tax-free Childcare Scheme allows working parents to save up to £2,000 per child annually on approved childcare costs, with the savings capped at £500 every three months, or £1,000 for children with disabilities.

"Over the summer holidays, parents can benefit significantly, as the scheme provides a government top-up of £2 for every £8 deposited into the account. This is a great way to manage rising childcare costs while keeping flexibility to withdraw unused funds if plans change."

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According to the director, it does not take long at all to sort. Robert said: "Families can apply online for Tax-free Childcare through the government website in just 20 minutes. Once the account is set up, parents can deposit money immediately and use it to pay for nurseries, childminders, summer activity clubs, and other approved providers. Any unused money can be withdrawn at any time."

There are criteria to take part. To qualify, each parent must earn at least 16 hours per week at the National Minimum Wage or Living Wage, but no more than £100,000 annually.

The scheme is not available to those receiving Tax Credits, , or childcare vouchers. For self-employed individuals or directors, proof of income, such as accountant statements, invoices, or bank statements, may be required to confirm eligibility.

The scheme supports children aged 11 or under, or up to 16 if they have disabilities. Eligibility ends on September 1 following the child's 11th or 16th birthday, depending on their circumstances.

It comes as a recent study has shown that 61% of parents feel the strain to overspend during the summer holidays, with 51% worried they won't be able to afford a holiday this year. The average weekly cost of childcare has risen by 11.41% since 2023.