New Tax Free childcare scheme 2017
A new scheme is to be launched by the government in early 2017 aimed at working parents who have no access to the current Employer Supported Childcare scheme.
Any working family can use the new Tax-Free Childcare, provided they meet the eligibility requirements.
The scheme is available for children up to the age of 12, and it will also be available for children with disabilities up to the age of 17.
How do we qualify?
Both parents have to be in work, each earning at least £115 a week and no more than £100,000 per year.
Self-employed parents are also eligible for the scheme. Newly self-employed parents who are not earning the £115 yet and in the ‘start up’ phase will also be eligible. Parents on paid sick leave, paid and unpaid statutory maternity, paternity and adoption leave are also eligible.
I am in the current Employer Supported Childcare scheme what should I do?
Parents are under no obligation to switch to Tax-Free Childcare.
Employer-Supported Childcare will operate until April 2018, and parents already registered by this date will be able to continue using it for as long as their employer offers it.
The new scheme is based on savings per child per year, whereas the existing Employer Supported Childcare scheme offers tax savings per parent per year. The National insurance relief is also different. Keep an eye open for the government childcare calculator on GOV.UK which will show parents which scheme they are better off joining.
Employers’ workplace nurseries won’t be affected by the introduction of Tax-Free Childcare.
When will this happen?
The scheme will initially be aimed at parents with the youngest children. If they have other children in childcare, they can also register them at the same time as their youngest child. The government have said that all eligible parents will be able to join the scheme by the end of 2017.
How will it operate?
Parents will be able to open an online account through gov.uk which they (and others) can pay into and which they can use to pay for childcare from a registered provider.
For every 80p a parent pays in, the government will pay in extra 20p (which makes it equivalent to being tax fee.) Parents can receive up to £2,000 per child, per year, towards their childcare costs, or £4,000 for disabled children up-to a maximum of £10,000.
Every 3 months parents will need to log in to the account to re-confirm their circumstances. They will be able to pay more in some months and less in others and if circumstances change or they no longer want to pay into the account, then they will be able to withdraw the money that has built up (minus the government’s equivalent contribution.)
Will my childcare provider know about the scheme?
HMRC started sending letters to regulated and approved childcare providers across the UK in September, asking them to sign up online for Tax-Free Childcare.
As soon as providers receive their invitation they can sign up online. They need to do this as soon as possible as registration can take up-to 3 months.
Once childcare providers sign up, parents will be able to search using HMRC’s new digital tool for childcare available under this scheme.
It is important to make sure your childcare provider has signed up online in order to receive payments.
Nannies can also sign up. HMRC will need your National Insurance number to sign up-to the scheme.
For more information please see the following on the GOV.UK website:
- HMRC has published a short guide for those who provide childcare: http://bit.ly/2bIw7Cb
- Ten things parents should know about tax-free childcare: http://bit.ly/2bPQpY9
Some of the above information has been taken from the HMRC website.