Tax-Free Childcare: 10 things parents should know
Top ten things to know about the new Tax-Free Childcare scheme.
Tax-Free Childcare will be available to up to 1.8 million households to help with the cost of childcare, enabling more parents to go out to work, if they want to, to provide greater security for their families. Here’s the top ten things to know about the scheme…
1. You’ll be able to open an online account
You’ll be able to open an online account, which you can pay into to cover the cost of childcare with a registered provider. This will be done through the government website, GOV.UK. Tax-Free Childcare will be launched from early 2017.
2. For every 80p you or someone else pays in, the government will top up an extra 20p
This is equivalent of 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 (or £4,000 for disabled children).
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 17, as their childcare costs can stay high throughout their teenage years.
4. To qualify, parents will have to be in work, earning just over an average of £50 a week and not more than £150,000 per year
The scheme is designed to be flexible for parents if, for example, they want to get back to work after the birth of a child or work part-time.
5. Any eligible working family can use the Tax-Free Childcare scheme - it doesn’t rely on employers offering it
Tax-Free Childcare doesn’t rely on employers offering the scheme, unlike the current scheme Employer-Supported Childcare. Any working family can use Tax-Free Childcare, provided they meet the eligibility requirements.
6. The scheme will also be available for parents who are self-employed
Self-employed parents will be able to get support with childcare costs in Tax-Free Childcare, unlike the current scheme (Employer-Supported Childcare) which is not available to self-employed parents. 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.
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, but those already registered by this date will be able to continue using it for as long as their employer offers it. However, Tax-Free Childcare will be open to more than twice as many parents as Employer-Supported Childcare.
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 you the flexibility to pay in more in some months, and less at other times. This means you can build up a balance in your account to use at times when you 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
The process will be light-touch and as easy as possible for you. 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. You’ll be able to withdraw money from the account if you want to
If your circumstances change or you no longer want to pay into the account, then you’ll be able to withdraw the money you have built up. If you do, the government will withdraw its corresponding contribution.
More information will become available ahead of the scheme being introduced so parents making childcare decisions are able to consider all their options.
HM Treasury’s infographic explains how the scheme will run.
Last year we asked parents for their views on how this scheme should be designed. If you’re interested in how we formed the policy after this feedback, then you can read more on what we’re doing to make Tax-Free Childcare simple, flexible and fair.
You can also access the full consultation response document online.
Latest News from
UK to galvanise support for Ukraine’s recovery at OECD meetings07/06/2023 09:38:00
Foreign Secretary chairs the OECD’s Ministerial Council Meeting in Paris to mobilise international support for Ukraine’s recovery and tackle global challenges.
Employee share scheme shake up to help boost growth05/06/2023 16:10:00
Schemes offering people shares in their employer are set for a shake up as the government explores changes that will help boost business growth, supporting the Prime Minister’s priority to grow the economy.
Chancellor reveals life sciences growth package to fire up economy26/05/2023 13:10:00
A £650 million war-chest to fire up the UK’s life sciences sector and drive forward the government’s priority to grow the economy was yesterday (25 May 2023) unveiled by the Chancellor of the Exchequer Jeremy Hunt.
Chancellor reveals life sciences growth package to fire up economy26/05/2023 09:05:00
A £650 million war-chest to fire up the UK’s life sciences sector and drive forward the government’s priority to grow the economy has been unveiled by the Chancellor of the Exchequer Jeremy Hunt yesterday 25 May 2023.
Readout of the Chancellor's meetings with food manufacturers and the CMA24/05/2023 11:10:00
The Chancellor met food manufacturers and the CMA to discuss public concerns over food inflation
Chancellor opens IMF Article IV Press Conference23/05/2023 14:20:00
Chancellor opens IMF Article IV Press Conference at HM Treasury on 23 May 2023.
Government sells £1.26 billion of NatWest shares reducing stake to 38.6%23/05/2023 11:10:00
NatWest is a step closer to being returned to full private ownership as the government sells c. £1.26billion in shares back to NatWest via a Directed Buyback.
Sir Ron Kalifa and Frances O’Grady reappointed to the Court of the Bank of England22/05/2023 13:25:00
Sir Ron Kalifa and Frances O'Grady have been reappointed by His Majesty the King as Non-Executive Directors of the Court of the Bank of England. They have been reappointed for second terms of four years, to 31 May 2027.