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TAX FREE CHILDCARE SCHEME

01/11/2016

The Government has said that tax-free childcare will be introduced in early 2017. The scheme will be rolled out gradually to families, with parents of young children able to apply first and it is hoped all eligible parents will be able to join the scheme by the end of 2017.

The tax-free childcare scheme will enable eligible families with children aged under 12 (or 17 for children with disabilities), to receive a contribution of 20% from the Government towards their childcare costs. For example, for every £8 a parent pays into the scheme, the Government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs, or £4,000 for disabled children.

To be eligible for the tax-free childcare scheme, both parents in the family must work and each earn less than £100,000 per annum (with a minimum weekly income at least equivalent to 16 hours at the rate of the national minimum wage). 

Parents will be able to open their own childcare accounts online and the good news is, this scheme will not be led or have to be administered by employers.

If employers currently offer a childcare voucher scheme to their employees, this scheme will need to be closed to all new entrants from April 2018. Parents already registered in the childcare voucher scheme by this date will be able to continue using it for as long as it is offered by the employer.

Employees will not be able to take advantage of both the employer run childcare voucher scheme and the tax-free childcare scheme. Checks will be carried out by HM Treasury to prevent employees claiming both types of childcare help.

Fiona Haworth. You can contact Fiona on fiona@practical-hr.co.uk

If you feel that you need guidance or advice on this matter, please call Practical HR on 01702 216573 or email Fiona on the above.


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