Tax-Free Childcare is finally here. After initially being announced in 2013, this new government initiative will be slowly rolled out this year, replacing the existing Childcare Voucher Scheme from April 2018.
How will Tax-Free Childcare benefit you?
Tax-Free Childcare will cover 20% of childcare costs (up to £2,000 per child, per year), for children up to the age of 12.
To qualify for the scheme, you and your partner must be in work and each earn at least £115 a week, but no more than £100,000 each per year. You should also be aware of the following points:
- Tax-Free Childcare is essentially an online account in which you will pay money into. To open an account, you must have children aged up to 12, or 17 if they have disabilities
- Anyone can pay into the account, not just you and your partner
- For each 80p paid in the government will add 20p
- The money must be used to pay for childcare with a carer who is registered to receive a Tax-Free Childcare payment
- To qualify, you must not be receiving free or subsidised childcare, or childcare vouchers from your employer
- If you close the account or do not use the money for childcare, you will lose the government’s contribution
Tax-Free Childcare vs. Childcare Vouchers
Tax-Free Childcare will soon replace Childcare Vouchers. However, if you sign up for Childcare Vouchers before April 2018, they will still be available to you and you will get to choose which scheme is more tax efficient for you.
Childcare Vouchers enable savings of up to £933 per parent (£1,866 per family). Yet, Tax-Free Childcare saves 20% on childcare costs of up to £10,000 per child. There is no right answer as to which scheme is most beneficial; it all depends on your personal circumstances. On the Tax-Free Childcare website there is a great comparison table, which you can use to understand the differences between the two schemes and decide on which one is most suitable to you.
What you need to do now
Tax-Free Childcare is slowly being rolled out this year and will be available to those with the youngest children first. A fixed date for the scheme has not yet been announced, but we recommend you register on the gov.uk portal now so that you will be the first to know when you are entitled to open an account.
If you are not currently registered for Childcare Vouchers, we also recommend that you join now so that you are able to choose the scheme that is more beneficial to you after April 2018.
For further information regarding Tax-Free Childcare and whether you can claim, contact firstname.lastname@example.org.