Tax Free Childcare

17 April 2017

The Government’s new Tax-Free Childcare scheme will be phased in across the UK from 28 April 2017, and will replace the current Childcare Voucher Scheme.

For the first time, the scheme will not only cover full time employees but also those who are part time, on maternity, paternity or adoption leave and people who are self-employed, subject to meeting HMRC’s eligibility criteria.  Initially, the scheme will only be available to parents of children under 2 years old, but by the end of the year this will be extended to all working parents across the UK with children under 12, or under 17 if disabled.

How the scheme works

The Government offers working families 20% support towards qualifying childcare costs.  Through the childcare service, parents must apply to open an online childcare account provided by NS&I, which payments can be paid into by the families and out of directly to the childcare provider.  For every £8 that is paid in to the account, the Government will make a top up payment of an additional £2, up to a maximum of £2,000 per child per year (£4,000 for disabled children).

Once this scheme has been implemented, any Employer Supported Childcare (ESC) schemes will be closed.  However, if you are already in an ESC prior to the launch you will have a choice of which scheme you would like to stay with, and the same scheme must be used for each child.

You can find a Childcare Calculator on the HMRC website which will help you compare the schemes available to you and check which works best for your family.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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