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.

Scheme comparison
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No refunds available Funds can be withdrawn if circumstances change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