Tax-Free Childcare and the Childcare Service
Dear Parents, you may already know about the Tax Free Childcare Scheme which was launched in April 2017 and provides parents with support towards childcare costs of up to £2,000 per child per year. What you may not be aware of is that this new scheme will replace the existing Childcare Voucher Scheme, which will be phased out in April 2018. However, those in the Childcare Voucher Scheme can stay in the old scheme if they wish to. Set out below is some important and useful information about the service.
1. You’ll be able to open an online account
You will be able to open an online account, which you can pay into to cover the cost of childcare with a registered provider. This must be done through the government website, www.gov.uk . You will be able to apply for all your eligible children at the same time.
2. For every 80p you or someone else pays in, the government will top up an extra 20p
This is equivalent of the tax most people pay - 20% - which gives the scheme its name, ‘tax-free’. 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 (or £4,000 for disabled children).
3. The scheme will be available for children under the age of 12
It will also be available for children with disabilities under the age of 17, as their childcare costs can stay high throughout their teenage years.
4. To qualify, both parents will have to be in work, and each earning at least £120 a week and neither parent earning more than £100,000 each per year
To qualify, you will both need to be working and earn a minimum of the equivalent of 16 hours/week at the national living or minimum wage (currently £120/week).
You can work fewer than 16 hours/week as long as your weekly income is more than the £120/week minimum. If you're self-employed and your income varies hugely on a weekly basis – eg, £50 one week, nothing the next, then £500, then £750 – it won't matter; as long as your three-monthly average meets the £120/week minimum, you'll be eligible.
You also need to earn less than £100,000 a year – this applies to both, so if one earns more then, as a couple, you cannot access Tax-Free Childcare. It will also be available to parents on paid sick leave.
If you're on paid and unpaid statutory maternity, paternity and adoption leave, it still counts as being in work so you can still benefit from the scheme; however, eligibility is limited to the last 14 days of leave (for the baby whom you're off with). You can apply for other children you have though so you can still use the scheme for older siblings.
5. Any eligible working family can use the Tax-Free Childcare scheme - it does not rely on employers offering it
Tax-Free Childcare does not rely on employers offering the scheme, unlike the current scheme Employer-Supported Childcare. Any working family can use Tax-Free Childcare, provided they meet the eligibility requirements.
6. The scheme will be available for parents who are self-employed
Self-employed parents will be able to get support with childcare costs in Tax-Free Childcare, unlike the current scheme (Employer-Supported 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.
7. If you currently receive Employer-Supported Childcare (Childcare Voucher Scheme) then you can continue to do so
You do not have to switch to Tax-Free Childcare if you do not wish to. Employer-Supported Childcare will continue to run. The current scheme will remain open to new entrants until April 2018. Parents 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.
8. Parents and others can pay money into their childcare account as and when they like
This gives you the flexibility to pay in more in some months, and less at other times. This means you can build up a balance in your account to use at times when you need more childcare than usual, for example, over the summer holidays.
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 as easy as possible for you. For example, you will re-confirm your circumstances every 3 months using a simple online process; and there will be a simple log-in service where parents can view accounts for all of their children at once.
10. You will be able to withdraw money from the account if you want to
If your circumstances change or you no longer want to pay into the account, then you will be able to withdraw the money you have built up. If you do, the government will withdraw its corresponding contribution.
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