This autumn the Government will implement a new Tax-Free Childcare Scheme.
The aim is to support working families with their childcare costs. The scheme will provide 20% tax break calculated on £10,000 childcare costs so parents can save up to £2,000 per child in a year (with no limit on the number of children you can claim for). This means that for every 80p parents put in to the account, the Government will top up an extra 20p.
Why is it important?
- From the moment the new Tax-Free scheme is launched, current Childcare Vouchers will be closed for new entrants.
- Parents will be able to claim vouchers only under one scheme at the time.
- As opposed to the current Childcare Vouchers, Tax-Free Childcare scheme does not need to be offered by employers meaning that any eligible working parents can sign up online on their own.
- The new scheme is not offered through the employer anymore
- Initially, the scheme will be available to parents with children under the age of five, however within one year it will become also available to children under 12
- The scheme is also available to disabled children up to the age of 17.
- Parents will be able to open their account and claim childcare costs per child providing their annual income does not exceed £150,000 per parent.
- The scheme will continue being available to parents even when they are on sick, maternity, paternity, parental or adoption leave.
- In order to qualify for the scheme both parents must be working (if it is a couple), and in single-parent families the single parent must be working
- Tax-Free Childcare will be available to self-employed parents as well. The government will introduce a ‘start-up’ period, for newly self-employed parents, during which their weekly income may be lower than the minimum of £50.
- If parents decide to leave the scheme, they will be able to take away the money built in, but this will prompt the government to withdraw its contribution.
What Stays the Same
- The Government supports working parents with their childcare costs
- Parents who use the current scheme will be able to continue buying vouchers providing they stay with the same employer and the employer continues to offer the scheme.
What Needs to Be Done
- An eligible parent will be able to sign up in an online account directly with the provider, National Savings and Investments (NS&I)
- There is a three monthly eligibility confirmation that parents have to submit in order to continue using the scheme