Tax-Free Childcare – Ten Things Professionals Should Know

June 11, 2015 12:03 pm
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From autumn 2015 Tax-Free Childcare will be available to working parents. Here are the top ten things childcare professionals need to know to answer parents’ questions.

1. The scheme will launch in autumn 2015

Parents will be able to open an online account, which they can pay to cover the cost of childcare with a registered provider. This will be done through the government website, GOV.UK.

2. For every 80p parents 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 will top 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.

3. The scheme will be available for children up to the age of 12.

It will also be available for children with disabilities up to the age of 16, as their childcare costs can stay high throughout their teenage years.

4. To qualify, parents will have to be at work, earning just over an average of £50 a week and not more than £150,000 per year.

5. Any eligible working family can use the Tax-Free Childcare scheme – it doesn’t rely on employers offering it.

6. The scheme will also be available for parents who are self-employed.

To support newly self-employed parents, the government is introducing a ‘start-up’ period. During this, self-employed parents won’t have to earn the minimum income level, £50 a week. The scheme will also be available to parents on paid sick leave and paid and unpaid statutory maternity, paternity and adoption leave.

7. If you currently receive Employer-Supported Childcare then you can continue to do so.

You do not have to switch to Tax-Free Childcare if you do not wish to. Employer-Supported Childcare will continue to run. Parents won’t be able to register for Employer-Supported Childcare after Tax-Free Childcare is introduced in autumn 2015, but those already registered by this date will be able to continue using it for as long as their employer offers it.

Employers’ workplace nurseries won’t be affected by the introduction of Tax-Free Childcare.

8. Parents and others can pay money into their childcare account as and when they like.

This gives parents the flexibility to pay more in some months, and less at other times. This means they can build up a balance in their account to use at times when they need more childcare than usual, for example, over the summer holidays.

It’s also not just the parents who can pay into the account – if grandparents, other family members or employers want to pay in, then they can.

9. The process will be as simple as possible for parents

For example, parents won’t have to report any change of circumstances to HMRC; there will be a single log-in service where parents can view accounts for all of their children at once.

10. Parents will be able to withdraw money from the account if they want to.

If parents’ circumstances change or they no longer want to pay into the account, they’ll be able to withdraw the money they have built up. If parents do withdraw, the government will withdraw its corresponding contribution.