24th March 2014
From autumn 2015 almost two million UK households will benefit from Tax-Free Childcare which according to the Government will enable more parents to work if they want to.
Here are the top facts you need to know:
1. The initiative will launch in autumn 2015
From then, parents will be able to open an online account, via the government website gov.uk, which they can pay into to cover the cost of childcare with a registered provider.
2. For every 80p paid in, the Government will top it up with an extra 20p
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
However 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 need to be in work
The scheme is designed to be flexible for parents who wish to return to the workplace after the birth of a child or work part-time. To qualify, parents must be 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
The scheme does not rely on rely on employers, like the current plan Employer-Supported Childcare. Any working family can use the Tax-Free Childcare scheme, provided they meet the scheme’s eligibility requirements.
6. The scheme will also be available for parents who are self-employed
Unlike the Employer-Supported Childcare scheme, self-employed parents can also get support with childcare costs in Tax-Free 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 will not have to earn the minimum income level, £50 a week. In addition, 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
Parents do not have to switch to Tax-Free Childcare if they do not want to. Employer-Supported Childcare will continue to run. But parents will not be able to register for Employer-Supported Childcare after Tax-Free Childcare is introduced in autumn 2015. However 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 will not be affected by the introduction of Tax-Free Childcare.
8. It is not just the parents who can pay in
It is 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. Cash is not locked into the account
If circumstances change or parents no longer want to pay into the account, then they can stop and withdraw the money. Of course, the Government will pull its contribution too.