Tax-free childcare - 10 things parents should know
Tax-Free Childcare is being made available to nearly two million households to help with the cost of childcare. From eligibility criteria to how it affects current childcare provisions, here's our rundown of what the new scheme means for your family finances.
1. The scheme launched in 2017 and will be rolled out bit by bit
Tax-free childcare was introduced on April 21 2017 and is being gradually rolled out across the year. Starting with parents of younger children, and prioritising children with disabilities, it will be available to all eligible families by the end of 2017.
In September, as parents sent their children back to school for the new academic year, Education Secretary Justine Greening wrote an exclusive guest post for Mumsnet in which she outlined the Government’s new childcare policy.
You can apply for the scheme 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 tops 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 children with disablities).
3. The scheme will be available for children up to the age of 12
For children with disabilities, whose childcare costs can remain high through the teen years, it will be available up to the age of 17.
4. To qualify, parents will have to be in work
…earning at least £120 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 previous scheme (Employer-Supported Childcare).
6. The scheme is also 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 period, self-employed parents don't have to earn the minimum income.
The scheme is also 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 don’t have to switch to Tax-Free Childcare unless you wish to.
Employer-Supported Childcare continues to run and registered parents can use it for as long as their employer offers it. The scheme will also remain open to new entrants until April 2018. Employers' workplace nurseries aren't affected by the introduction of Tax-Free Childcare.
8. The process will be as simple as possible for parents
You open an online account, which you pay into to cover the cost of childcare with a registered provider. This is done through the government website, GOV.uk, via 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.
Other people, such as grandparents and other family members can also pay into the account if they wish.
10. You can 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.