Tax-free Childcare – Enrollment ends December 2017
Tax-Free Childcare is available to around 2 million households to help with the cost of childcare, enabling more parents to go out to work, if they want to, to provide greater security for their families.
Tax-Free Childcare was introduced on 21 April 2017 and is being gradually rolled out over 2017, with parents of children aged under four (on 31 August), and parents of disabled children (aged under 17) able to enter the scheme first. This is designed to help working parents with the cost of childcare.
Parents will be able to apply for all their children at the same time, when their youngest child becomes eligible. All eligible parents will be able to join the scheme by the end of 2017.
Parents of the youngest children can now open an online account, which they can use to pay for childcare from a registered provider. This is in addition to the 30 hours of free childcare available to all eligible children of age 3 and 4 years in England.
For every £8 a parent pays in, the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs, or £4,000 for disabled children.
The scheme will be available for children under the age of 12, or under 17 for children with disabilities.
To qualify, parents will have to be in work, and each expecting to earn at least £120 a week. Each parent must not have income over £100,000 per year.
Ten things to know about Tax-Free Childcare:
1. You can open an online account
You can 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 (or £4,000 for disabled children).
3. The scheme is available for children under the age of 12
It is also available for children with disabilities under the age of 17, as their childcare costs can stay high throughout their teenage years.
4. To qualify, parents have to be in work, and each earning at least £120 a week and not more than £100,000 each 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 Tax-Free Childcare, provided they meet the eligibility requirements.
6. The scheme is available for parents who are self-employed
Self-employed parents are able to get support with childcare costs in Tax-Free Childcare, unlike the current scheme (Employer-Supported Childcare) which is not available to self-employed parents. 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.
The scheme is 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. The current scheme will remain open to new entrants until April 2018. Parents 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 aims to be as simple as possible for parents
The process is as easy as possible for you. For example, you need to re-confirm your circumstances every 3 months using a simple online process; and there is a simple 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 can withdraw the money you have built up. If you do, the government will withdraw its corresponding contribution.
For more information about this and examples of comparisons of families in different financial situations click here for an information sheet.
As employers, SYLO Associates can help with this and other employee related issues.
Information provided by www.gov.uk