TFC35300 | Qualifying payments: calculating the top-up element and the maximum amount

Childcare Payments Act 2014, section 21

Money paid into a childcare account is topped up by the Government at a rate of 25% of the amount deposited. The topped-up amount will therefore be 20% of the total balance. The maximum amount of top-up that the Government will pay per year is up to £2,000 per child and £4,000 for a disabled child. This money must be used to pay for qualifying childcare.

Example 1

Amanda pays £2,000 into her child’s childcare account during an entitlement period. Amanda is entitled to a top-up payment, which is 25% of the qualifying payment. 25% of £2,000 = £500. This is the top up payment HMRC must pay into the childcare account. The topped-up amount (£500) is 20% of the total balance (£2,500).

Example 2

Julia pays £5,000 into her child’s childcare account during an entitlement period. Julia is entitled to a 25% top-up payment, but only £2000 of the total amount is eligible for top up, as the maximum top up allowed per EP is £500. 25% of £2,000 = £500. This is the top up payment HMRC must pay into the childcare account. The topped-up amount (£500) is 20% of the total balance of the current EP (£2500). The remaining £3000 will stay in the excess account and in the next EP a further £2000 from the original amount of £5000 will receive £500 and so on.