Tax-Free Childcare scheme

July 6, 2015

Recent developments in the new Tax-Free Childcare scheme, has meant that it’s unlikely to launch until early 2017.  However, it’s worth knowing your childcare voucher options now, as it may be too late to sign up for an alternative scheme next year.

The Government announced a new childcare voucher scheme called Tax-Free Childcare, which is likely to launch in early 2017.  For those entitled to the scheme, it should cover 20% of childcare costs for children up to the age of 12.  For children with disabilities, this is extended to the age of 17, because their childcare costs can stay high into their teenage years.

Will I qualify?

To qualify all parents in the household must be working, not earning more than £150,000 and not receiving tax credits or Universal credit.  The plan is to make the new scheme available to families with children under 5 first, then phasing it in for older children.

Which scheme do I go for?

If you already use a childcare voucher scheme e.g. Sodexho, EdenRed you can either stay in the scheme you are in or move to the the Tax-Free Childcare scheme – BUT you won’t be able to change back once you have moved.  It’s difficult to work out which scheme to be part of, as both schemes are different.  You need to investigate both options now and sign up for the childcare voucher scheme if that’s preferable to you, before it’s too late.

If one parent isn’t working, you won’t be eligible for the Tax-Free Childcare scheme, likewise if you claim tax credits or have older children – childcare vouchers can be claimed up until the age of 15.

Only one parent can claim for the new scheme, whereas both of you can claim for the existing voucher scheme.

The Tax-Free Childcare Info Hub has a handy calculator which may help you decide:   Tax-Free Calculator

Advantages of the new scheme:

Tax-free Childcare is available to any eligible working family and you don’t have to rely on your employer to offer the scheme, unlike teh existing childcare voucher scheme.

It’s also available to the self employed, and there are benefits to the newly self employed people too.  It’s also available to people on paid sick leave, maternity, paternity and adoption leave.

Parents with more than one child may be better off with the new scheme as the existing childcare voucher scheme saving is limited to £933 per parent, whereas Tax-Free Childcare offers up to 20% of savings per child per year.

How will it work?

If eligible you will be able to set up an online account and pay into it to cover the cost of a registered childcare provider.  This means someone who is Ofsted registered – you won’t be able to use the scheme to pay for family or friends who look after your child unless they are registered.  The Government will ‘top up’ your account with an extra 20p for every 8-p you pay in.  You can pay money in when you want to, and build up a balance to pay for additional childcare over the summer holidays if required.  Other people can pay money into your account too!

More information about the new scheme, and the existing scheme can be found by reading http://www.tax-free-childcare.info/parents/ and we will keep you informed of developments as we know them.