tax-free-childcare

Tax-Free Childcare: What you need to know

Over the past three years, the term ‘Tax-Free Childcarehas become more and more familiar in the childcare world. However, despite this there is still much confusion around the forthcoming changes and how they may affect UK families. With many working parents feeling like they still don’t know enough about the new government initiative, we take a look at the key facts you should know about the scheme, to make sure you make the right choice for your family.

Planned launch date
The government’s original plan was to launch Tax-Free Childcare in autumn 2015, and close the existing Childcare Voucher Scheme to new entrants. However, in July 2015, it was announced that the launch would be delayed by 18 months and is now expected to be introduced “from early 2017”.

Applying for Tax-Free Childcare
The government hasn’t finalised how the new Tax-Free Childcare system will work, but there is likely to be a period where you can ‘register your interest’ prior to the launch.

Administering the scheme
Unlike the current Childcare Voucher Scheme, Tax-Free Childcare will be administered by parents rather than their employer. Parents will therefore be responsible for updating their details or confirming they are correct every 3 months.

Eligibility criteria
Similar to Childcare Vouchers, the new Tax-Free Childcare Scheme has certain eligibility criteria which parents should check they meet before applying for the scheme. For more information on the eligibility rules which apply to both schemes, take a look at our fact sheet.

Child age restrictions
Parents can claim for children up to the age of 12 with Tax-Free Childcare, but up to 15 years of age (or 16 if registered disabled) with the current Childcare Voucher Scheme.

Managing childcare providers
Current guidance suggests that the childcare provider criteria for accepting Tax-Free Childcare is likely to be the same as it is currently for Childcare Vouchers. So as long as a childcare provider is Ofsted (or equivalent) registered they should be able to receive either form of payment.

Finding the best scheme for your family
Although Tax-Free Childcare will be available from early 2017, it is not necessarily the best option for all families. According to research by Sodexo Benefits and Rewards Services, 66% of parents are more likely to better off taking Childcare Vouchers, which is great news considering the Childcare Voucher Scheme will be open to current entrants until April 2018.

 

To keep your options open, it is best to sign up to the current Childcare Voucher Scheme now, so you have the choice between the two schemes when the changes come into place next year. Don’t forget you can also sign up to our newsletter to keep up-to-date with the latest developments during the run up to the changes.