Tax-Free Childcare: 10 things parents should know
Published: 25 Jan 2016
From next year, Tax-Free Childcare will be available to nearly two million households to help with the cost of childcare. From eligibility criteria to how it will affect current childcare provisions, here's our rundown of what the new scheme will mean for your family finances.
1. The scheme will launch early next year
The date has been pushed back from original plans to launch in autumn 2015. It will be available to all eligible families by the end of 2017, rolled out throughout the year, based on children's ages - starting with parents of youngest children and prioritising children with disabilities.
You’ll be able to apply for all your children at the same time, when your youngest child becomes eligible.
2. For every 80p you pay in, the government will top up an extra 20p
This is equivalent to 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 (or £4,000 for disabled children).
3. The scheme will be available for children up to the age of 12
And for children with disabilities up to the age of 17, as their childcare costs can stay high throughout the teenage years.
4. To qualify, parents will have to be in work
...earning around £115 a week and not more than £100,000 per year.
5. Any eligible working family can use the Tax-Free Childcare scheme
It doesn't rely on employers offering it, unlike the current scheme (Employer-Supported Childcare).
6. The scheme will also be available for parents who are self-employed or on maternity/paternity leave
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. You can continue to receive Employer-Supported Childcare instead
If you currently receive Employer-Supported Childcare then you do not have to switch to Tax-Free Childcare if you do not wish to.
Employer-Supported Childcare will continue to run, and registered parents will be able to use it for as long as their employer offers it. Employers' workplace nurseries won't be affected by the introduction of Tax-Free Childcare.
8. The process will be as simple as possible for parents
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, and there will be a single log-in service where parents can view accounts for all of their children at once.
9. You can pay money into your account as and when you like
You can choose to pay in more in some months, and less at other times, meaning 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 too.
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.
More information will become available ahead of the scheme being introduced so parents making childcare decisions are able to consider all their options.