New childcare tax break to be announced by the Government today - what do you think?

[JaneGMumsnet]

David Cameron and Nick Clegg are due to unveil new childcare plans in a joint press conference today, with further detail expected to follow next week.

According to reports, families could be entitled to claim up to £2,000 per child every year from their tax bills, to cover the cost of childminders and nurseries as part of a new government scheme to help families.

The new measures will not be means tested, and will replace the current voucher and allowances scheme.

We'd be interested to hear what you think of these proposed changes, particularly in the light of the changes to child benefit which have been implemented today.

Thanks,

MNHQ

[Narked]

'It's a smokescreen to take the attention off the changes to child benefit, which, lets face it,is only a matter if time till they lower and lower the salary threshold until it becomes means tested [cynical emoticon]'

^ This

[AnnieLobeseder]

TwelveLeggedWalk: I'm not entirely sure whether higher rate tax payers save 40%, since they don't pay 40% on their entire salaries. I could look at DH's salary but I'm not sure how it's all calculated. Perhaps someone else will know.

In theory, though, if you claim back 40% on £124/month, you would be saving 1240.412 = £595/year.

I'm all for self-employed people and folks whose employers "won't do" vouchers making a saving too, as the current system is unfair on them. But any new system would have to be fair on everyone - all tax brackets, low and high earners, self-employed and parents of pre- and school-aged children. And, like I said before, just letting us claim back tax paid on childcare would cover all these bases!!

[namechangerforaday]

You dont lose the accumulated vouchers if you give up work.

[fijamez]

Another impact will be to pull more people into the bracket where they lose child benefit as Vouchers are generally provided via salary sacrifice and thus gross salaries will rise if scrapped

also agree that impact on parents where kids are over 5 is considerable if no subsidy etc for wrap around care/ afterschool/holiday clubs - perhaps they dont realise not everyone has a job which stops all summer and has 4 weeks off at christmas!

[namechangerforaday]

And my question also is I will have £1000 worth saved, ready to put DC3 in playgroup in 2 years - what will happen to these

[NotAQueef]

I don't think this will affect my family as we don't currently use the voucher scheme. I am fortunate that mine and DP's employer offer salary sacrifice (with no limit) for nursery fees (there is a day nursery on site at the uni)
DP sacrifices around 11k of his salary to cover the annual fees and we save around £2700 (not sure of exact figures). In addition we receive a slightly discounted 'rate at the nursery for being staff.
I would hope the proposed changes will help more people than it will negatively impact, but based on recent evidence, I fear it won't

[babymooner]

Anything that finally gives self employed a break has to be good news. No maternity pay, no childcare vouchers... it's really hard. So being able to put some childcare against tax is long overdue.

[Strix]

"families could be entitled to claim up to £2,000 per child every year from their tax bills"

Does this mean I will get £2000 back per child? Or does it mean I will get the tax on £2000 back per child?

I think we are at real risk of encouring the cash in hand nanny (black) market with all that is being done to NOT support working families. You have to make an awful lot of money to be able to afford UK taxes and still eat.

I want all of my childcare costs (some £2000 per month) to be taken out of my income before I am taxed, and I don't want my pension contribution to be affected as they are with the current voucher scheme. If this was implemented, we would find a lot more nannies being paid on the books.

[HoratiaWinwood]

Notaqueef - the current tax relief is only available up to £243 ish a month. You might be getting £11k a year in vouchers but the sums are being done wrong if they're calculating his taxable income on gross minus eleven.

[egdeh]

From what I read, it looks like this policy would cost us the whole of our 12 x £243 vouchers claimed by DH, to be replaced by nothing as I don't earn enough to qualify.
If we are entitled to the £2k per child, only our youngest would qualify, despite needing childcare for all 3 to cover before / after school. I am lucky to work part-time, flexibly, term-time only, so out-of-school care for us is far less than many will need to pay for, but this is at the expense of having given up both salary and responsibility to take on a role which allowed this.
So, personally it appears we will lose out financially (again!) and, if the reports of it being mothers earning £20-40k who will be eligible, it will also not help many lower paid / part-time workers, only those higher up the ladder, which seems perverse if the aim is to encourage women to return to work.

[curryeater]

If it means you actually get £2k per child back, than it's better than the vouchers. If it means you can get tax back on £2k, then it's worse.
But the whole lot should be tax free. If you gross up what you need to earn to pay for two pre-schoolers in full time care, it makes you feel ill. (It makes you feel ill before you gross it up, then afterwards has you actually reaching for a bucket)

[curryeater]

x-posted with Strix. Strix is right

[AnnoyedAtWork]

I have a feeling I will be no better off or in fact will be worse off. It depends if the £2000 is savings made or tax deductible allowance. If the latter I will be worse off than currently claiming childcare vouchers. If the former I will be no better off. (1 child, I'm higher rate taxpayer, DP is basic, we both claim vouchers, but I get less)

I'm very disappointed thought this would be helping working parents more but in fact it is just a simplification of all the kinds of childcare help into one method and doesn't actually help at all.

[AnnoyedAtWork]

I strongly believe all ccare should be payable out of gross income. It is an expense that is necessary in order to go to work!

[Strix]

Thanks, curry.

And I do think whatever they announce will replace the vouchers because it would not be cost effective for the government to run two separate schemes.

I wonder if they might axe that ofsted quango in order to pay for giving me tax free childcare... hey, a girl can dream.

[musicalfamily]

if they axe childcare vouchers, what happens to the money that is sat there (ie any accumulation) as most schemes will want to close? I hope you don't lose the money...

[curryeater]

There are two separate things here:

Should child-care be tax-deductable? - yes, obviously, but completely, not partially

Does this off-set losses in CB? - only if you work and pay for childcare. Lots of people (especially the lower paid) have deliberately and painstakingly constructed lives which do not require paid-for childcare, because it is eye-wateringly expensive (shift working, reciprocal arrangements, family help etc). This is very unfair. It's like giving tax relief on champagne but not beer.

[caramelwaffle]

How does this tie in - in detail - with the Universal Credit?

What happens with help for children requiring paid childcare age 5-15?

What forms of childcare is covered? Nanny? Au Pair? Nursery? Family?

Why not just have 100% tax deductable childcare for those in work?

[floatyjosmum]

have to admit i got excited when i saw it but then read on and to me it sounds like they are going to replace the childcare voucher scheme and if this is the plan we are no better off.

[AnnieLobeseder]

Though to be fair, curryeater, some people are low-paid in jobs which don't have shift patterns nor family to help, and reciprocal arrangements aren't easy. I think this is why a lot of us are arguing for a universally fair system such as fully-tax deductible childcare costs, as this will cover all eventualities and situations.

[curryeater]

That's true Annie - it is a truth universally acknowledged that some people will just have to pay for childcare in order to work and I am one of them - but it is still worth noting that those who don't are often struggling with great ingenuity within a system of very very expensive formal childcare, and they are being penalised for this resourcefulness.

[olgaga]

It looks as though anyone who wants to be a full-time parent had better become a childminder - and look after the children of those who are lucky enough to find work!