The Tax-Free Childcare scheme is due to launch in early 2017 and will be available to more than 2 million households. The scheme will help more parents to go to work and manage childcare costs. For every 80p contributed by the parents, the government will top this up with 20p, up to £2,000 each year, per child.
You will be able to open an online account –
You will be able to open an online account which you pay into to cover the cost of the childcare with a registered provider. This account will be available to access through the government website. Tax-Free Childcare will be launched from early 2017. The scheme will be rolled out gradually to families, with parents of the youngest children able to apply first. Once your youngest child becomes eligible, you will be available to register all your children at the same time.
For every 80p paid in, the government will top up an extra 20p –
This is equivalent of the tax most people pay – 20%. The government will top-up the account by 20% up to £10,000, which is the equivalent of £2,000 support per child, per year.
Available until children are 12 years old –
The scheme will be available for children up to the age of 12, and up to 17 years for children with disabilities.
To qualify, parents will have to be in work, earning £115 a week and not more than £100,000/year –
The scheme is designed to be flexible for parents wanting to get back to work after the birth of their child, whether that is full-time or part-time.
Any eligible family can use the Tax-Free Childcare Scheme –
The Tax-Free Childcare scheme does not rely on employers offering the scheme. Any working family that can use the Tax-Free Childcare scheme if they meet the eligibility requirements.
The scheme is available for self-employed parents –
Self-employed parents will be able to get support with childcare costs. The government will introduce this offering with a ‘start-up’ period to support self-employed parents, during this time, self-employed parents will not have to earn the minimum income level.
You can continue to use Employer-Supported Childcare –
You do not have to switch to the new scheme if you do not wish to as the Employer-Supported Childcare will continue to be available. The current scheme will remain open to new entrants until April 2018 and will be able to continue to use it for as long as their employer offers it. The new Tax-Free scheme will be available to twice as many parents.
Flexibility paying into the online account –
Parents can be flexible with their payments into the accounts, paying in more some months and less at other times. This means you can build up a balance in your account to use when more childcare costs are required. Grandparents, other family members and employers can also pay into this account if they wish to.
Keeping the process as similar as possible –
The process will be as straightforward as possible. You will be able to re-configure your circumstances every three months via a simple online process. Your online account will also mean you are able to view your childcare accounts in one place.
You can withdraw money from the account –
If your circumstances changes or you no longer want to pay into the account, you will be able to withdraw the money you have built up. If you do, the government will withdraw its corresponding contribution.
For further information or guidance about how option is best for you and your family, please contact Rebecca Potton, Head of Tax & Private Clients