Expert advice on tax-free childcare during the summer months
With the summer holidays fast approaching and inflation hitting its highest level in 40 years, Ross Boyd, director of consultancy RB+ Chartered Accountants, advises parents across Northern Ireland to take advantage of the tax-free childcare breaks this summer.
Ross explained: “As inflation soars, household budgets across the country are under intense pressure. We are all feeling the pinch, with the recent National Insurance hike, higher VAT in the hospitality sector and other tax-generating initiatives, as we seek to entertain our children this summer.
“However, many may not be aware that there are tax breaks available to parents. The government’s tax-free childcare scheme provides working families, including those who are self-employed, with help for child care expenses for children 11 years of age or younger.
“Zero-rated child care centers are available for children up to 11 years old, or 17 years old if they have additional needs. For every £8 you pay, the government adds £2 up to a maximum of £500 every three months, or £1,000 if your child has complex needs. There are also income limits which should be taken into account if you are earning more than £100,000 or less than the National Living Wage.
There are various eligibility requirements for the program, including employment status, income, your child’s age, your circumstances, and your immigration status.
Ross continued, “Parents should also be aware that tax-free child care accounts aren’t just for regular child care expenses. They can also be used to pay for after-school or summer childcare costs, such as licensed vacation clubs, childminders or sports activities.
“If you are a business owner, Tax-Free Childcare is great news for you as an employer and parent. The program can help you keep a full workforce during school vacations because it helps employees pay for childcare during work hours.
A tax-free child care account can also work as a nest egg, allowing parents to save for when care is most needed and money may be tight.
Ross added: “You can deposit money into your Tax-Free Childcare account whenever you want. This allows you to pay more in some months, and less in other times, building up a balance to use during summer vacation, for example, when you need more childcare. You can also ask grandparents and other family members to pay for birthday gifts instead.