Are you entitled to childcare when contracting through your Limited Company?

One of the great positives from contracting and running your own Limited Company is the flexibility it provides. You get to choose when, where and for whom you work, and can chop and change whenever you like.

So how does being a Limited Company contractor work when you’re a parent? In this blog we explore your options when it comes to having a family and what support there is from the government.

Childcare costs

It’s no secret that childcare is costly, especially when you have more than one. And as any parent will know, when it comes to work you have to weigh up your number of hours versus how much those hours will cost in childcare costs. So, is it worth it, and what help is available when it comes to paying for it all?

Childcare vouchers

Sadly childcare vouchers are not available to those who are self-employed, and only those who were previously using the scheme prior to October 4^th 2018 are allowed to continue using them. The scheme is, however still available to those in permanent employment, so if you were to go from Limited back to being employed, you’d be able to take advantage of the vouchers.

Aid for the self-employed

The following schemes are available to both employees and the self-employed:

1. Tax-Free Childcare scheme

A government initiative which allows you to ‘top-up’ the amount you pay into your Tax-Free childcare account. It works by the government adding 20p onto every 80p that you personally pay into your childcare account. If you’re eligible you can claim up to £2,000 per year per child, who’s aged up to 11. The total you’re able to claim in any given year is £10,000, and up to £500 per quarter, per child.

2. Tax-Free Childcare if your child is disabled

The amount you’re able to claim if you have a disabled child is increased to £4,000, and they’re able to remain on the scheme until they’re 17. To be eligible your child must already receive either the Disability Living Allowance (DLA), the Personal Independence Payment (PIP), or the Armed Forces Independent Payment (AFIP), and / or be registered severely sight impaired or fully blind.

Who’s allowed to use the tax-free childcare scheme?

The scheme is available to both those who are self-employed and those in permanent employment. Traditionally, to be eligible for the scheme you’d need to earn a minimum of £120 per week, but if you’re new to contracting and not quite earning that amount, this limit is waived for your first 12 months of trading. In order to qualify you’ll need to do the following:

• Be working and/or on parental, sick or annual leave
• Have a child / children younger than 11 years old
• Have a child / children who live with you for the majority of the time
• Be earning the National Minimum Wage, for at least 16 hours each week

Keeping in touch with gov.uk

To continue receiving your tax-free childcare, you must reconfirm your personal details and circumstances every three months. Should you miss the deadline, you’ll be expected to cover gaps of any outstanding childcare payments yourself, so set those calendar reminders!

Are other people able to pay into your childcare account?

Whilst the account can only be only opened by one person and kept in one person’s name, anyone can contribute to your child’s childcare account. Which is handy if you’re no longer with your child’s mother / father, or if they have keen grandparents, they can help out financially too. They can do so by transferring money directly into your account via standing order or bank transfer.

How does it work?

Once your money has reached your childcare online account, the government’s contribution will appear shortly after, or later on in the same day.

How to apply for Tax-Free Childcare

You can create your account online from the gov.uk website. You’ll need to create your gateway account first (if you’re yet to do so), then you’re able to apply for tax-free childcare online.

When completing this process, you’ll also be given the opportunity to see whether you’re better off receiving tax-free childcare relief, or staying with the childcare scheme. To see if you’re eligible, you’ll need:

• Your UK passport
• Tax credit information
• Your P60 or a recent payslip (if you have one)
• Your National Insurance number
• Your unique taxpayer reference (UTR) number

Are you able to claim if you’re already claiming financial support?

If you’re already receiving Working Tax Credit, Child Tax Credit, or Universal Credit, you won’t be able to claim for tax-free childcare. If you decide to also claim for the tax-free childcare and are successful in doing so, any other credits you receive will stop, so it’s worth seeing which holds the greatest financial value to you. The gov.uk website has an online tool which helps you decide which financial aid option is right for you, according to your eligibility.

30 free hours for three and four year olds

In addition to tax-free childcare, you’re also entitled to claim 30 hours free childcare for 38 term-time weeks per year, for any children aged three and four. To apply you follow the same stages as before, selecting the 30 hours free option. Beware though that if yours or your partner’s annual earnings are above £100,000 per year, you won’t be eligible for the 30 free hours.

How SG Accounting can help

Here at SG Accounting we make it our business to not only know your accounts, but your personal circumstances, so that we’re able to help you make the most from your contractor take home pay. Whether it’s pension advice, financial guidance or helping you plan for your future, our team of expert accountants are here to help you at every stage of your life. Get in touch today to find out more.