Can you claim free childcare whilst working through your Limited Company?

Ask any parent what the most expensive part of having children is, and the majority will most likely tell you it’s childcare costs. Second to your monthly mortgage or rental costs, you may find that what you pay in childcare will be a close second.

But fret not! There is help out there. In this blog we explore the world of free childcare, how to check your eligibility, and what the restrictions are when it comes to your earnings.

How much are you entitled to?

If your child is aged 9 months to 4 years old you may be eligible for free childcare whilst living in England. The total amount of free childcare you’re entitled to will be based on:

• Your circumstances and your child’s age
• Whether you’re working (self-employed, employed or a director)
• Your income (and your partner’s income if you have one)
• Your immigration status if not a UK resident
• You may also be entitled to free education and childcare for 2 year olds under a separate scheme

Please note that there are different childcare schemes in Scotland, Wales and Northern Ireland. In this blog we will only focus on those available in England.

Your circumstances and child’s age

The total number of free childcare hours you’re entitled to will be determined firstly by your child’s age. Children aged 9 months to 2 years could be entitled to 15 free hours per week, and children aged 3 to 4 years old may be entitled to 30 free hours per week. If your child doesn’t normally live with you, you may not be eligible.

If you’re working

Most working people are eligible for free childcare if you (and / or your partner if you have one) are:

• Working or will be starting employment shortly
• Are on sick or annual leave
• Currently on shared parental, maternity, paternity or adoption leave

If you’re starting a new job or are on shared parental, maternity, paternity or adoptive leave

The date from which you’re entitled to free childcare will be determined from when you return to work:

Starting / returning to work date When you can get hours from

1^st May to 30^th September Term starting on or after 1^st September

1^st October to 31^st January Term starting on or after 1^st January

1^st February to 30^th April Term starting on or after 1^st April

If you’re not currently working

You may still be eligible for free childcare if your partner is working, and you’re on carer’s leave, or you receive any of the following:

• Incapacity Benefit
• Severe Disablement Allowance
• Carer’s Allowance
• Limited Capability for Work Benefit
• contribution-based Employment and Support Allowance

If you’re a foster carer

You’re able to claim free childcare if you foster your child, so long as:

• you’re working in paid work that’s outside of your fostering role
• your ‘adjusted net income’ is below £100,000 for the current tax year

You’re unable to use the online application to apply for free childcare when fostering. You’ll need to liaise with your social worker and your local authority when you’re ready to apply.

Your income

The amount you (and your partner if you have one) earn over the next three months must be expected to be at least:

• £2,380 pretax if you’re aged 21 or over (£183 p/w)
• £1,788 pretax aged 18 to 20 (£137 p/w)
• £1,331 pretax aged under 18 or currently completing an apprenticeship (£102 p/w)

This is the National Minimum Wage or Living Wage for an average 16 hour working week.

You’re able to use an average of how much you’d expect to earn over the course of the current tax year if:

• You’re not paid regularly but do work throughout the year
• If you’re self employed and do not expect to earn enough in the next 3 months

For example

• You’re 21 or over
• Do not have a regular income but earn at least £9,518 a year
• Which equates to the same as earning £2,379 every 3 months

If you’re self employed and your business is less than 12 months old

You’re able to earn less yet still be eligible for free childcare for those parents that work.

If you have more than one form of employment

You’re able to use your total earnings to see if you’re income meets the threshold. This can include:

• Your earnings from any employment
• Your earnings from any self-employment

You can use just your self-employed income if you think it’ll meet the criteria, if your expected average self-employed earnings over the tax year are more than you’ll receive over the next 3 months as an employee.

Income which will not count towards your minimum earnings

There are certain types of income which are not eligible when it comes to meeting the minimum amount you must earn to be eligible:

• Dividends
• Interest
• Investment property income
• Pension payments

You’ll also not be eligible if you or your partner have an expected adjusted net income of over £100,000 in the current tax year. This will most likely be the biggest barrier to free childcare when running your own Limited Company, so it’s strongly advisable to speak to your SG accountant to understand the parameters of your income and the effects this could have on your eligibility.

Your immigration status

You (and your partner if you have one) must have a National Insurance number to be eligible for free childcare. The person applying for free childcare must also have one of the following:

• British or Irish citizenship
• Settled or pre-settled status, or evidence of you applying and you’re currently waiting on a decision
• Permission for access to public funds – your UK residence card will confirm this

How SG Accounting can help

Here at SG your dedicated accountant is here to support both your personal and professional plans and successes. From helping you understand what you’re entitled to, to ensuring you’re maximising your take home pay, we’re here to help. Get in touch with us to discuss your current circumstances or future plans and whether you’re entitled to free childcare.