Child care costs have risen by an incredible 37% in the last five years. As a result the government has been forced into action and from Autumn 2015 they will be introducing a tax free childcare scheme to help working parents, including those self-employed.
So what does the tax free child scheme involve?
- Parents will create and make contributions into an online childcare account. For every 80p that is contributed by the parents, the government will contribute 20p until the capped limit of 10,000 is reached. This means that the government is prepared to pay a total of £2,000 per child per year
- Parents can pay into the accounts as and when it suits them, they can also contribute as much or as little as they would like, there is no pressure. (The government’s contributions however will always be capped at £2,000 per child per year)
- If at any given time the account is no longer required, it is possible to withdraw the money, however, the government will also take back any funding that they have contributed to the account
To qualify for this new scheme:
- Both parents must be working and earning just over £50 a week, but cannot be earning more than £150,000 per annum
- Children must be under the age of 12. However, the scheme covers children with disabilities up to the age of 17 due to their childcare costs remaining high in the teenage years
- The scheme also applies if you are on paid sick leave, paid and unpaid maternity and paternity leave and adoption leave The tax free childcare scheme is definitely a step in the right direction and with the user-friendly and flexible accounts the majority of working parents should hopefully see the benefit.