Tax-Free Childcare: 10 things parents should know

working mother and childUnder proposals from the coalition government, Tax-Free Childcare will be available to nearly two million households to help with the cost of childcare, from next year.

From eligibility criteria to how it will affect current childcare provisions, here's our rundown of the top 10 things you need to know about the scheme.

 

1. The scheme will launch in autumn 2015 

You'll be able to open an online account, which you can pay into to cover the cost of childcare with a registered provider. This will be done through the government website, GOV.UK. 

2. For every 80p you or someone else pays in, the government will top up an extra 20p

This is equivalent of the tax most people pay - 20% - which gives the scheme its name, 'tax-free'. The government will top up the account with 20% of childcare costs up to a total of £10,000 - the equivalent of up to £2,000 support per child per year. 

3. The scheme will be available for children up to the age of 12

It will also be available for children with disabilities up to the age of 16, as their childcare costs can stay high throughout their teenage years. 

4. To qualify, parents will have to be in work, earning just over an average of £50 a week and not more than £150,000 per year

The scheme is designed to be flexible for parents if, for example, they want to get back to work after the birth of a child or work part-time. 

5. Any eligible working family can use the Tax-Free Childcare scheme - it doesn't rely on employers offering it

Tax-Free Childcare doesn't rely on employers offering the scheme, unlike the current scheme Employer-Supported Childcare. Any working family can use the Tax-Free Childcare scheme, provided they meet the scheme's eligibility requirements. 

6. The scheme will also be available for parents who are self-employed

Unlike the current scheme (Employer-Supported Childcare) which is not available to self-employed parents, self-employed parents will be able to get support with childcare costs in Tax-Free Childcare. To support newly self-employed parents, the government is introducing a 'start-up' period. During this, self-employed parents won't have to earn the minimum income level, £50 a week. 

The scheme will also be available to parents on paid sick leave and paid and unpaid statutory maternity, paternity and adoption leave. 

7. If you currently receive Employer-Supported Childcare then you can continue to do so 

You do not have to switch to Tax-Free Childcare if you do not wish to. Employer-Supported Childcare will continue to run. Parents won't be able to register for Employer-Supported Childcare after autumn 2015, but those already registered by this date will be able to continue using it for as long as their employer offers it. However, Tax-Free Childcare will be open to more than twice as many parents as Employer-Supported Childcare. 

Employers' workplace nurseries won't be affected by the introduction of Tax-Free Childcare. 

8. Parents and others can pay money into their childcare account as and when they like

This gives you the flexibility to pay in more in some months, and less at other times. This means you can build up a balance in your account to use at times when you need more childcare than usual, for example, over the summer holidays. It's also not just the parents who can pay into the account - if grandparents, other family members or employers want to pay in, then they can.  

9. The process will be as simple as possible for parents

The process will be light-touch and as easy as possible for you. For example, parents won't have to report any change of circumstances to HMRC; there will be a single log-in service where parents can view accounts for all of their children at once. 

10. You'll be able to withdraw money from the account if you want to

If your circumstances change or you no longer want to pay into the account, then you'll be able to withdraw the money you have built up. If you do, the government will withdraw its corresponding contribution. 

 

 

Last updated: 20-Mar-2014 at 11:54 AM