Childcare vouchers being replaced by tax-free childcare scheme - what you need to know

Tax-free childcare support

If you use the childcare voucher scheme or are planning on putting your child in childcare soon, you'll need to know about upcoming changes to the government childcare support scheme and how it will affect what financial support you are entitled to.

On 4th October 2018, the childcare voucher scheme that is currently in place to help parents with the costs of childcare will close. It will be replaced by the new Tax-Free Childcare scheme, which parents can already apply for.

The childcare voucher scheme was set to close on 6th April 2018 but the government has announced its decision to delay this closure by six months.

How do I sign up to the Tax-Free Childcare scheme?

Parents, including those who are self-employed, can apply online for Tax-Free childcare by visiting Childcare Choices and creating an online 'childcare account'.

For every £8 parents pay into their childcare account, the government will add an extra £2, up to a maximum of £2,000 per child per year (or £4,000 for children with disabilities). Once eligible parents have opened their new account they can start paying their childcare provider straight away, using the government contribution.

tax-free childcare

If I already use childcare vouchers, can I carry on using them?

If you already use childcare vouchers, you will be able to carry on using them for as long as your employer continues to run the scheme, and for as long as you work for the same employer. If you move to a different job or your employer stops running the voucher scheme, you can apply for the new Tax-Free Childcare scheme instead.

Can I still choose to sign up for the childcare vouchers scheme?

If you decide that the new Tax-Free Childcare scheme isn't suitable for you, you can still sign up to the childcare vouchers scheme at any time before 5th October. You will only be able to do this if your employer if still running the vouchers scheme and if your child is already in childcare by 5th October.

Am I eligible for Tax-Free Childcare?

In order to be eligible for Tax-Free Childcare, you must:

  • Have one or more children aged under 12 who lives with you. Adopted children are eligible but foster children are not.
  • Work at least 16 hours at week at National Minimum Wage (which works out to be £120 if you are over 25). If you are in a couple, both of you need to be working 16 hours a week. This does not apply if you’re self-employed and started your business less than 12 months ago.
  • Earn under £100,000 a year (either you or your partner).
  • Not claim tax credits.
  • Make sure your childcare provider is signed up to the scheme before you pay them.

You can still apply for if you’re on paid sick leave, parental leave or adoption leave or getting Maternity Allowance. You can also apply if you’re not working, but expect to start a new job in the next 14 days.

You may still be able to get Tax-Free Childcare if you aren’t working but you receive Incapacity Benefit, Severe Disablement Allowance, Carer’s Allowance,
contribution-based Employment and Support Allowance or National Insurance credits because of incapacity or limited capability for work.

Can I apply for Tax-Free Childcare if I currently receive child benefit and/or 15 or 30 hours of free childcare?

Yes, you can still apply for Tax-Free Childcare if you currently recieve child benefit, 15 hours free childcare for children aged two to four years old or 30 hours free childcare.

Which is best for me; the childcare vouchers scheme or the new Tax-Free Childcare scheme?

If you are basic-rate taxpayer with total childcare costs of £9,336 or less, you will be better off if you choose the childcare vouchers scheme, as long as your employer still offers it. If you are a basic-rate taxpayer with childcare costs of more than £9,336, you will make a greater saving with the Tax-Free Childcare scheme.

If you are a higher-rate taxpayer with total childcare costs of £6,252 or less, you will be better off if you choose the childcare vouchers scheme, as long as your employer still offers it. If you are a higher-rate taxpayer with total childcare costs of more than £6,252, you will make a greater saving with the Tax-Free Childcare scheme.

What if I work freelance or I'm self-employed?

If you work on a freelance basis or are self-employed you will not, up until now, have been eligible for financial childcare support. However, the new scheme is open to freelancers and self-employed workers, meaning they will also be entitled to the £2,000 towards their childcare costs.

To find out which government childcare support is best for you, you can use the government’s childcare calculator.