Martin Lewis: working families can use HMRC tax credits 'free money'

Rhyl Journal

20-05-2025

Tax-Free Childcare can be used flexibly to pay for childminders, wraparound and holiday childcare - which can make a huge difference to parents trying to cover 13 weeks a year of school holidays with five weeks' annual leave.
Parents and guardians can use Tax-Free Childcare to save thousands on wraparound childcare and holiday club costs, with financial support of up to £2,000 a year per child, or £4,000 if their child is disabled, towards the cost.
Martin discussed the benefit on his podcast this week, saying: "800,000 eligible families do not claim Tax Free Childcare, even though this is basically free money - it's not free money being paid for by the state or the taxpayer - however it's free money for an individual to help with childcare.
"The problem with it is called Tax Free Childcare, but it's not about tax, and it's not tax free, and it's called tax free childcare, which is a political point made by the government who introduced it to try to say it was the equivalent to paying it from your pre tax income. But that's just baloney and bolderdash and any other b word you want to think of, right?
"So what tax free childcare is? It's basically an account where you save for childcare and then you get a bonus of 20p for every 80p you've added and that goes towards our childcare to and can be paid for whatever is relevant childcare. It's absolutely worth doing for anyone who qualifies."
He added: "I think if we renamed it the 'working family childcare top up', because it's for working families only, it's for childcare, and it tops up what you pay, that gives people a better understanding. We've done a lot of research that shows if people understood it better, they would claim it more."
Tax-Free Childcare is a scheme that can be used to pay for any approved childcare so parents can arrange their childcare to suit them - whether that's wraparound care, a childminder, after school clubs or school holiday care.
For every £8 deposited in a Tax-Free Childcare account, the government tops it by £2 which means parents can receive up to £500 (or £1,000 if their child is disabled) every 3 months to use to pay for their childcare costs.
Parents can use the scheme to pay for childcare for children aged 11 or under, or up to 16 if the child has a disability.
It's quick and easy to apply on the HMRC website.
​
Your child must be 11 or under and usually live with you. They stop being eligible on September 1 after their 11th birthday. Adopted children are eligible, but foster children are not.
Neither parent can earn more than £100,000 a year after deductions.
If your child is disabled and usually lives with you, you may get up to £4,000 a year until 1 September after their 16th birthday. They're eligible for this if they:
Recommended reading:
HMRC says you can use it to pay for approved childcare, for example:
Your childcare provider must be signed up to the scheme before you can pay them and benefit from tax-free childcare. It's a good idea to check with your provider to see if they're signed up beforehand.
If your child is disabled, you can use the extra tax-free childcare money you get to help pay for extra hours of childcare. You can also use it to help pay your childcare provider so they can get specialist equipment for your child such as mobility aids.
Once an account is opened, parents can deposit money and use it straight away or keep it in the account to use it whenever it's needed. Any unused money in the account can be withdrawn at any time.