Tax-Free Childcare will be introduced on 28 April 2017, and will then be gradually rolled out over 2017, with parents of children under two invited to enter the scheme first.
What is tax-free childcare?
Tax-Free Childcare will be introduced on 28 April 2017, and will then be gradually rolled out over 2017, with parents of children under two invited to enter the scheme first. People will be able to apply for all their children at the same time, when their youngest child becomes eligible. All eligible parents will be able to join the scheme by the end of 2017.
TFC is the Government’s new way of providing childcare support to parents and it will eventually replace directly contracted childcare and childcare vouchers currently offered through employers. Unlike the employer-supported childcare schemes, TFC will be available to both employed and self-employed parents.
To support TFC’s rollout a new Childcare Choices Government website has been launched. Parents can pre-register for the government’s new childcare offers through this site.
How does tax-free childcare work?
TFC is a UK wide scheme covering England, Scotland, Wales and Northern Ireland. The scheme will run through an online account which a parent can pay into to cover the cost of childcare with a registered provider. There will be an offline option for those who are unable to use the online service.
Parents will pay money into the online account and the Government will add money to the account. Parents can then use the account to pay for childcare (providing the childcare provider is registered to accept payments from the scheme). For every £8 paid in, the Government will make a top-up payment of an additional £2, up to a maximum of £2,000 per child per year (or £4,000 for disabled children).
The scheme will be available for children under the age of 12. This is extended for children with disabilities under the age of 17.
What does it mean for employers?
Employees do not have to switch to Tax-Free Childcare if they do not wish to. Employer-Supported Childcare arrangements (e.g. childcare vouchers and directly contracted childcare) will continue to run. The current schemes will remain open to new entrants until April 2018 and parents already registered by this date will be able to continue using them for as long as their employer offers them.
Employers’ workplace nurseries won’t be affected by the introduction of Tax-Free Childcare.
What are my employees’ options?
Some people will be better off claiming TFC than tax credits or universal credit. Similarly, some people may be better off claiming TFC than employer-supported childcare. However, some people will be better off staying on the other schemes.
The decision about whether to claim TFC and leave an existing scheme is a complicated and important decision. The Childcare Choices website includes a Childcare Calculator for parents to compare all the government’s childcare offers and check what works best for their families.
Through the Childcare Choices website parents can also pre-register for email alerts that will notify them when they can apply for TFC, as well as providing details of existing government childcare offers.
From September 2017 parents of three and four year old children living in England will also be able to apply for a new 30 hours free childcare offer, worth around £5,000 per child.
Further information on TFC can be found at https://www.gov.uk/government/news/uk-families-will-soon-see-bills-cut-as-date-announced-for-the-launch-of-tax-free-childcare and https://www.childcarechoices.gov.uk/.