How 5 minute task helped me save £230 a month on childcare and 800,000 parents are still missing out

AS a mum of three kids all requiring various forms of childcare, saving money is one of my top priorities.

But it was only last year that I decided to take the plunge and open a tax-free childcare account – and immediately saved myself thousands of pounds a year.

I now can’t believe it took me years to open an account and I’d urge other mums to take the time as soon as possible.

With one child, Georgia, going to after school club and twins Charlie and Bobbi in childcare three days a week since they were six-months-old, I’m kicking myself at how much money I could’ve saved over the past few years if I’d applied sooner.

Tax-free childcare is a scheme that offers parents up to £2,000 a year per child towards childcare costs including nurseries and holiday camps.

But around 800,000 families of the 1.3million eligible are thought to be missing out on the benefit because they haven’t applied.

This might be because of its confusing name, which means parents don’t really understand the significant savings available.

The scheme allows you to save money into an account for childcare costs, and the government will top up 20% of your savings.

So, for example, for every £8 you pay into your online childcare account, the government will pay in £2 that you can use to pay your childcare provider.

APPLYING FOR TAX-FREE CHILDCARE 

I’d been told about tax-free childcare in passing before, but didn’t really understand how it worked or what the benefit would be. 

Plus, getting it set up seemed too complicated and I didn’t think I had the few hours it required to open the accounts.

But after my fixed rate mortgage ended and my monthly repayments rose at the beginning of 2024,  I suddenly found myself really struggling with childcare costs and looking for any savings.

I went back and looked at opening the account and, while it wasn’t as straightforward as it should have been, it was able to get it sorted in a few hours and it’s been well worth it.

I transferred £100 into one of my children’s childcare accounts, and  a few hours later 20% of that sum was added to the account ready to be spent on childcare costs.

The penny dropped and I understood how much I could’ve saved and how much I could’ve done with the help.

My childminder and preschool payments were between £1,000 and £1,100 a month, plus after school club, which was another £150 a month, so over time I could have saved thousands of pounds.

WHO CAN GET TAX FREE CHILDCARE?

The benefit is for working parents who are earning less than £100,000 a year.

To be eligible, you and your partner (if you have one) must hope to earn at the minimum of £2,379 if you’re aged 21 or over, £1,788 if you’re aged 18 to 20, £1,331 if you’re under 18 or an apprentice.

There are special circumstances for people who have just gone self employed or are starting up a business.

For more details, head to the Government website.

The first step is to get a Government Gateway account set up, if you don’t already have one. 

Once you have access, you will need to set up an account for each child – you will just need to input their name and date of birth.

Each child will then be given a reference number.

When you’ve set up your children’s account, you will be able to select the childcare provider.

In theory, this should be straight forward with a drop-down menu of options.

Once you’re set up, you just need to be organised with your payments as you need to allow a few hours for the 20% to be added to your account before you make your payment.

In my opinion, it is a bit of a faff as you have to log into your tax-free childcare account a few times.

However, it’s still totally worth taking the time to sort.

This benefit is separate to the 15 and 30 free childcare hours, so you can take advantage of both.

CHANGES TO TAX FREE CHILDCARE

From September 2025, children aged nine months to two years old will get 30 hours per week of free childcare.

To qualify, the vast majority of parents will need to earn more than £9,518 but less than £100,000 a year.

Your two-year-old can also get free childcare if you live in England and get any of the following benefits:

• Income support
• Income-based jobseeker’s allowance (JSA)
• Income-related employment and support allowance (ESA)
• Universal Credit and your household income is £15,400 a year or less after tax, not including benefit payments
• The guaranteed element of pension credit
• Child tax credit, working tax credit (or both), and your household income is £16,190 a year or less before tax

Parents on Universal Credit and in a paid job can also have up to 85% of their childcare costs covered, up to £1,014.63 a month for one child and £1,739.37 a month for two or more children.

It doesn’t matter how many hours you work.

OTHER SUPPORT FOR PARENTS

If you’re more than 10 weeks pregnant or have a child under four, you may be able to get help buying food and milk through the Healthy Start scheme.

Families on Universal Credit can apply online if their take-home pay is £408 or less from employment.

If you get Child Tax Credit, you may be eligible for Healthy Start if:

• your family’s annual income is £16,190 or less
• you do not get Working Tax Credit

You can check out the full list of support by clicking the link here.