The Coalition’s original plan (announced at Budget 2013) was to launch Tax-Free Childcare in autumn 2015. However, in a press release on 1st July 2015, the Government announced that the launch will be delayed until “early 2017″. In the latest update (Budget 2016), the Government announced that Tax-Free Childcare will be phased in slowly from early 2017 with disabled and very young children first. The safest option, at this stage, is to sign up for Childcare Vouchers to ensure you have a choice between schemes when more details are released.
Eligible families will be entitled to a 20% rebate per child on their annual cost of childcare. So for every £80 a family puts into their Tax-Free Childcare account for childcare, the Government will pay in a ‘top-up’ of £20. This is limited to £10,000 per year, per child.
Tax-Free Childcare will be available for children under 12 years old. Children who are registered disabled will be eligible up to the age of 17.
To qualify, parents will have to be in work, earning the equivalent of 16 hours at minimum wage per week and not more than £100,000 per year. TFC is for households where all parents are working; both parents if they live together, a single parent, or the biological parent of the child and their partner (if they live with the child).
Yes, but only one biological parent will be able to open a Tax-Free Childcare account, as the account is per child not per parent, (as it is with Childcare Vouchers).
A parent may not claim Tax-Free Childcare on top of Tax Credits, Universal Credit or Childcare Vouchers.
Employers may choose to offer to take deductions from your net salary (after tax and National Insurance) on your behalf, but they are not required to do so.
No, Tax-Free Childcare isn’t planned to start rolling out until early 2017. The current employer-supported Childcare Voucher Scheme is available now, and can offer savings of up to £933 per year on registered childcare costs. Click here for further information.
If a family qualifies for Tax-Free Childcare, they will need to register online via a (yet to be determined) government website giving details on their household, work and child, and the government will confirm eligibility. Once eligibility is confirmed, an online child account will be opened. Parents will need to reconfirm their eligibility every quarter, in case their circumstances change.
Parents will manage their Tax-Free Childcare via an online site, into which they can make either regular or one off payments. The government will then ‘top up’ the account, adding 20% up to a maximum of £10,000 per child per year.
In April 2018 the existing Childcare Voucher Scheme will close to new entrants. At this time, parents who currently take Childcare Vouchers will be able to choose whether they switch to Tax-Free Childcare or remain on the existing scheme. This is a great position to be in.
We have created a Childcare Savings Calculator using current eligibility guidance from the Government, which takes into account your family circumstances and the number of hours of childcare you use. The calculator is a simple way for you to see whether Tax-Free Childcare or the existing Childcare Voucher Scheme is likely to save you more.
The criteria for accepting Tax-Free Childcare is due to be the same as it is for Childcare Vouchers, so as long as a childcare provider is Ofsted (or equivalent) registered they should be able to receive payment this way.