Changes in the way the government supports parents with childcare costs
The government has announced changes in the way it supports parents with registered or approved childcare costs.
Tax-Free Childcare is a new government scheme to help working parents with the cost of childcare. For every £8 a parent pays in, the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs, or £4,000 for disabled children.
Tax free childcare is being introduced from 2017. From April 2018, you will no longer have the choice to sign up for childcare vouchers. Financially, this will affect families differently, so it’s important that you understand the differences between the two schemes, what choices you have and when you need to decide by. The government has provided a calculator to help you understand what this means for you.
When will it start?
Parents can apply for Tax-Free Childcare from early 2017, starting with parents of the youngest children first. All eligible parents should have access to the scheme by the end of 2017.
Will I still be able to receive childcare vouchers?
Yes. The existing childcare voucher scheme is open to new joiners until April 2018. At this point the scheme will be closed to new joiners but existing scheme members will continue to receive childcare vouchers as they do today.
| Childcare vouchers | New tax-free childcare scheme |
|---|---|
| Only certain employers offer this | All employees and self-employed |
| Tax relief per employee | Tax relief per child |
| 32% tax relief for basic rate taxpayers and 21% for high level taxpayers | Flat 20% rate |
| Up to £933 tax and NI back each year | Up to £2,000 tax back each year |
| No extra relief for disabled children | Up to £4,000 a year back for each disabled child |
| Children up to age 15 | Children up to age 12 |
| Disabled children up to age 16 | Disabled children up to age 17 |
| Available to those earning over £100,000 | Not available for those earning over £100,000 |
| No refunds available | Funds can be withdrawn if circumstances change |
| Need to earn more than £8,200 a year to be eligible | Need to earn more than £115 a week to be eligible |
| Workplace nursery provision unaffected | Workplace nursery provision unaffected |
| National Minimum/Living Wage restrictions | No National Minimum/Living Wage restrictions |
| Registered childcare providers only | Registered childcare providers only |
| Can affect other childcare benefits, eg tax credits | Need to opt out of child tax credits |
| Employer's responsibility to keep records of eligibility | Individual needs to confirm elgibility online every three months |
| Employer/employee only contributions | Anyone can contribute |
| Available to new employees until April 2018 | Available to new employees from 2017 |
| Shuts to new employees from April 2018 | Fully operational from April 2018 |