A Guide to Childcare Tax Planning as a Dual Income Household
Childcare costs can be one of the most significant expenses for families in the UK, often rivalling mortgage or rent payments. However, with careful tax planning, parents can significantly reduce these costs and increase their disposable income. This guide explores the various childcare tax reliefs and schemes available to working parents.
Understanding Childcare Costs in the UK
Childcare costs in the UK have been steadily rising, making it essential for parents to explore all available financial support options. On average, parents pay around £14,000 per year for full-time childcare for a child under two. This substantial financial burden makes effective tax planning crucial for families.
The cost of childcare often leads to families having to decide whether or not both parents continue working full time. The government does offer schemes to incentivise parents to continue working however the majority of these benefits are withdrawn once one of these parents earns over £100,000.
How to save £4,081.20 of childcare fees through careful planning
Even if your adjusted net income exceeds the £100,000 threshold there are a variety of methods your adjusted net income can be reduced and eligibility to these entitlements reinstated.
The average hourly childcare cost comes in at £7.16 per hour, if you can reclaim eligibility to free childcare this could save you £4,081.20 per annum in childcare fees on top of benefitting from the £2,000 tax-free childcare scheme.
If you are unsure on your eligibility it would be worthwhile speaking to one of our specialist advisers and book a meeting following the links below.
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