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Introduction of the new Tax-Free Childcare

Background

Government assistance for parents seeking childcare funding has changed with the introduction of the new Tax-Free Childcare, launched April 2017. The new scheme was designed to make childcare more accessible by opening the scheme to self-employed people and being operated online.

How does the new scheme interact with the existing Childcare Voucher scheme?

The voucher scheme is not closing yet but won’t be accepting new entrants from October 2018 and, for existing members, will only run for as long as employers remain part of the scheme.

The eligibility for voucher scheme does not guarantee eligibility for Tax-Free childcare.

What do we know about the Tax-Free Childcare?

The new system will have the Government paying an extra 20p towards childcare for every 80p that you put in. So for every 80p you put in, the state will add 20p up to a cap of £2,000. This means you get up to £2,000 per child, per year to cover annual childcare costs of up to £10,000.

What are the eligibility criteria?

The scheme is open to children aged below 12 years but increases to 16 if the child is registered as disabled. Couples in a family must both be working to be eligible. If one isn’t working (except in the instances listed above), they won’t be eligible.

Currently, 3 and 4 year olds receive 15 hours of free childcare, which will increase to 30 hours across 38 weeks each year in September 2017. To be eligible for these extra 15 hours, a parent (or couple) must work a minimum of 16 hours per week, earning a minimum of £120 per week. High earners of £100,000 and above aren’t eligible for the scheme. A family with an income less than £46,000 have a much greater chance of qualifying for the scheme.

For the self-employed with irregular income, the assessment will be based on three-monthly average earnings of £120 per week.

How does it operate?

You can apply for the scheme on the government website Childcare Choices, where you are able to setup an online account, which is maintained by one parent only. This operates like an online savings account with the ability to either pay more or less into it depending on how much childcare you’ll need, especially over summer breaks, for example.

Parents can apply now if their child is under 4 by 31 August 2017 and those with disabled children under 17 can also apply now. Parents not in this group can sign up for notifications for when this will be available to them. Parents with more than one child will also be able to sign up for childcare cover for all of their children as soon as their youngest is eligible. Every three months, parents will need to re-confirm eligibility by ticking the box indicating that their circumstances haven't changed.

The childcare provider must be registered with a regulator such as Ofsted.

 
Last Updated: 19 Mar 2018 10:02AM GMT

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