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Could you explain the Childcare Tax Credits scheme?

There are two forms of tax credits for childcare that parents should be aware of and neither affect your normal Child Benefit.

The first is the Child Tax Credit. All parents responsible for one or more children are entitled to this tax credit — whether or not they work. The tax credit is based on your household's income and is paid directly to the person with principal responsibility for caring for the children.

The Working Tax Credit is a little more complex. Working Tax Credit is a benefit available to those on low incomes who work for 16 hours or more per week; it is not specific to parents. However for parents there is a childcare element to the credit, which provides help towards the costs of childcare. As with the Child Tax Credit, this is paid directly to the person principally responsible for caring for the children.

So what criteria must you meet to benefit from the childcare element of the Working Tax Credit?

• First and foremost, the childcare must be ‘registered' or ‘approved'. This includes registered childminders, nurseries and playschemes as well as various other schemes, such as school out of hours clubs, run by the local authority or by approved providers. Sometimes, it can cover childcare that takes place in your home, but it does not cover taking care of your own children, or the children of close relatives.
• At least one parent must be working at least 16 hours a week. If you are in a couple you must both be working at least 16 hours a week, unless one of you is unable to, through illness or for certain other accepted reasons. If you are on maternity or paternity leave, you may still be eligible.
• You can only claim for childcare costs that you actually pay for — so if you receive money or vouchers for childcare from other sources, such as a local authority or your employers, you will not be able to claim those amounts again from the tax credit.
• The credit can pay for up to 70% of childcare costs but there are limits. These are £175 per week for one child and £300 per week for two or more children. These are maximum amounts, however, and you may receive less, depending on your income.

The childcare element is claimed by filling out the appropriate section of the Working Tax Credit form, and you must include details of your childcare provider. Settings should be aware that they may be contacted to confirm information given by parents, and that parents will need to provide the setting's registration number to the authorities.

Further information, claim forms and leaflets — as well as confirmation on whether your personal circumstances make you eligible for help — are available from the Inland Revenue. Visit their website www.inlandrevenue.gov.uk and follow the links to tax credits.

If you would like further information on this topic, please contact the Inforamtion Service team who will be happy to help.

Email: Information Service
Tel: 020 7697 2595

Last updated: 18/08/2008