Tax-Free Childcare for many more people

After much delay, the Tax-Free Childcare scheme will be launched to parents from early 2017. The scheme will be rolled out gradually, with parents of the youngest children able to apply first. 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.

Throughout September and October 2016, letters were sent to regulated and approved childcare providers across the UK, asking them to sign up online for Tax-Free Childcare. Only childcare providers registered with a regulator can receive Tax-Free Childcare payments.

The relief will be 20% of the costs of childcare up to a total of childcare costs of £10,000 per child per year. The scheme will therefore be worth a maximum of £2,000 per child (£4,000 for a disabled child). All children under 12 within the first year of the scheme will be eligible (up to 17 for children with disabilities).

To qualify for Tax-Free Childcare all parents in the household must:

• meet a minimum income level based on working 16 hours per week at the National Living Wage
• each earn less than £100,000 a year, and
• not already be receiving support through Tax Credits or Universal Credit.

Parents will be able to open an online account into which the government will make 'top up' payments at a rate of 20p for every 80p that families pay in.

Self-employed parents will be able to get support with childcare costs using the Tax-Free Childcare scheme, unlike the current Employer-Supported Childcare scheme. To support newly self-employed parents, the government is introducing a 'start-up' period. During this period a newly self-employed parent will not have to earn the minimum income level.

How does this relate to Employer-Supported Childcare scheme?

The existing scheme, Employer-Supported Childcare, will remain open to new entrants until April 2018 to support the transition between the schemes. Parents already registered by this date will be able to continue using it for as long as their employer offers it.

Are you an employer?

If you are an employer currently offering an Employer-Supported Childcare scheme, you need to consider the terms under which you will continue to offer the scheme. Whether or not it is beneficial for your employees to remain in the existing scheme depends on a number of factors and you will need to ensure that employees have access to advice from the Childcare scheme provider.