Are you eligible for free childcare whilst working through your Limited Company?

If you ask any parent what their biggest monthly expenses are, childcare will most likely appear near the top of that list! For many, childcare costs are second only to mortgage/rent payments.

It may seem like these massive costs are an inevitable part of parenthood, but there is help out there! In this blog we’ll cover how to claim free childcare, how to check what you’re eligible for, and what the restrictions are based on your level of income.

Please note that this blog will focus only on childcare schemes available in England. There will be different schemes if you live in Scotland, Wales and Northern Ireland.

What are you entitled to?

If your child is between 9 months old to 4 years old, you could be eligible for free childcare. Exactly what you will be entitled to will depend on:

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

Entitlements based on your child’s age

The first factor used to determine the number of free childcare hours you’re entitled to is your child’s age. This means:

• Children aged between 9 months and 2 years old could be entitled to 15 free hours per week
• Children aged 3 to 4 years old could be entitled to 30 free hours per week

If your child doesn’t normally live with you, these entitlements may not apply to you.

If you’re working

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

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

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

The date you start/return to work will determine the free childcare you will be entitled to:

Starting/returning to work date	When you can get hours from
1st May to 30th September	Term starting on or after 1st September
1st October to 31st January	Term starting on or after 1st January
1st February to 30th April	Term starting on or after 1st April

 

If you’re not currently working

You might still be eligible for free childcare if your partner is working, and you’re on carer’s leave. You may also be eligible if 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

If you foster your child, you can claim free childcare so long as you are working in paid work that’s outside of your fostering role and your ‘adjusted net income’ for the current tax year is below £100,000.

When fostering, you won’t be able to use the online application to apply for free childcare. Instead, you need to speak with your social worker and local authority.

Your income

The amount you (and your partner if you have one) earn over the next 3 months must be expected to be at least:

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

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

You can use an average of how much you expect to earn over the duration of the current tax year if:

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

Here’s an example:

You would be eligible if you’re 21 or over and do not have a regular income but earn at least £9,518 a year (which is the same as earning £2,379 every 3 months).

If you’re self-employed

You can earn less and still be eligible for free childcare for working parents if your business is less than 12 months old.

If you have several forms of employment

You can use your total earnings to determine if your income meets the threshold. This can include any earnings from both employment and self-employment.

You can use just your self-employed income (if you think that it will meet the requirements) if your expected average self-employed earnings over the tax year are higher than what you would get as an employee over the next 3 months.

Income that doesn’t count towards your minimum earnings

Some types of income don’t count towards the minimum amount you need to earn to be eligible. This includes:

• Dividends
• Interest
• Investment property income
• Pension payments

Keep in mind that you will not be eligible if you or your partner have an expected adjusted net income of over £100,000 in the current tax year. This is a common barrier to free childcare if you run your own Limited Company.

To best understand the implications of your income, situation, and the other factors that can impact your eligibility, we suggest you speak to your Client Director at Aardvark.

Your immigration status

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

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

How Aardvark can help

At Aardvark, our team of expert accountants are here to help you understand your eligibility and what free childcare is available to you based on your circumstances. Get in touch with us today to see how we can help you.