What is Tax-Free Childcare?
Tax-Free Childcare is the government’s new scheme to support working families with their childcare costs. Launched in April 2017, parents can open an online account which they can pay into to cover the cost of the childcare with a registered provider.
When will the scheme launch?
The scheme will launch in April 2017 and parents of the youngest children will be able to apply first, with the scheme gradually being rolled out to all families by the end of 2017.
How will it work?
For every 80p paid into the online account, the government will top up the account with an additional 20% up to the total of £10,000. This is equivalent of the tax most people pay (20%) and up to £2,000 per child per year.
Who is the scheme available to?
The scheme will be available to families in England, Scotland, Wales and Northern Ireland who have children under the age of 12 years. It is also available to children with disabilities and £4,000 is available for disabled children.
Unlike the current scheme, Tax-Free Childcare is not dependent on employers offering the scheme. Rather than employers setting up a scheme and parents receiving vouchers through their employer, parents can simply set-up a Tax-Free Childcare account (through NS&I) and pay money into their account and receive the government’s contribution directly.
To qualify, parents must be in work and each earning at least £115 per week and no more than £100,000 each per year.
What happens if I’m self-employed or on maternity, paternity or adoption leave?
The scheme is available to parents who are employed and self-employed, and parents on maternity/paternity leave, parental leave, adoption leave, shared parental leave and sick leave will also be eligible.
What will happen to the existing ‘Childcare Voucher’ scheme?
The current Childcare Voucher scheme will remain open for new registrants until April 2018 and parents already registered will be able to continue using vouchers as long as their employer offers it.
Workplace nurseries will not be affected by the introduction of Tax-Free Childcare.
What happens if my circumstances change?
Every few months parents will be asked to reconfirm their circumstances using an online process. If circumstances change and parents no longer wish to pay into the account the money can be withdrawn (excluding the government’s contribution).
For more information about Tax-Free Childcare, please visit www.childcarechoices.gov.uk