Q: I have recently had a baby and I am now considering starting my own business rather than returning to employment.
I understand that there may be some help available towards my childcare costs. Are you able to give me some more information on this?
In April 2017, the Government launched the Tax-Free Childcare scheme. This scheme enables employees and the self-employed to receive up to £500 every three months (or £1,000 if you have a disabled child) directly from the Government. It is designed so that for every 80p that you pay into the account, the Government will add 20p.
For example, if your childcare bill was £500 per month, you would pay £400 per month and the remaining £100 would be paid by the Government. Over the year, this would cut your childcare costs from £6,000 to £4,800.
To be eligible for the scheme, you (and your partner, if you have one) need to be working and earning a minimum of £131 per week. Each parent also needs to earn less than £100,000 a year.
Self-employed people are also eligible for the scheme and, in fact, the eligibility criteria are less strict for the newly self-employed. The earnings limit does not apply if you started your business less than 12 months ago. After 12 months, if your income varies hugely on a weekly basis, it will not matter as long as your three monthly average meets the £131 a week minimum.
To join the scheme you will need to set up an online childcare account via childcarechoices.gov.uk. Only one parent can open the account, though both of course can use it. The Government will top up the account with the extra cash on the same day, so if you put £80 into the account in the morning, by the afternoon on the same day this should have been topped up to £100.
Every three months you will need to reconfirm that you are still eligible for the scheme.
Once the account has been set up, you will then be able to send payments from this account to your childcare provider’s bank account. Please note that your childcare provider must be signed up to the Tax-Free Childcare scheme. You can check this here: childcare-support.tax.service.gov.uk/par/app/checkerstart
If you would like to discuss your circumstances in greater detail, Ashdown Hurrey can advise on this matter in addition to other tax, accountancy and business matters. Contact Gemma Newstead on 01424 720222 or email her at email@example.com.