The government’s Tax-Free Childcare scheme will be launched to parents from early 2017. Clayton & Brewill explain who qualifies and how to claim.
Tax-Free Childcare aims to help working parents with the cost of childcare and it will be rolled out 
gradually from early 2017, with parents of the youngest children able to apply first.
You’ll be able to apply for all your children at the same time, when your youngest child becomes eligible. All parents will be able to join the scheme by the end of 2017.
The relief will be 20% of the costs of childcare (from a registered provider) up to a total childcare cost of £10,000 per child per year. In real terms, this means that for every £8 you spend on childcare, the government will contribute a further £2, up to £2,000 per child per year. All children under the age of 12 will be eligible. For children with disabilities, the government will contribute up to £4,000 per annum and Tax-Free Childcare will be available up to the age of 17.
Who is eligible for Tax-Free Childcare?
To qualify for Tax-Free Childcare all parents in the household must:
1. Be in work and expecting to earn at least £115 per week (based on working 16 hours per week on National Minimum Wage).
2. Each earn less than £100,000 a year, and
3. Not be receiving support through Tax Credits or Universal Credit.
How do I claim tax-free childcare?
Parents will be able to open an online account into which the government will make ‘top up’ payments at a rate of 20p for every 80p that you pay in. You can pay in at any time – so you can build up a balance for busy times such as summer holidays. Equally, you can take money out of the account – although the government will also withdraw its corresponding contribution.
If you are an employee and already receiving Employer-Supported Childcare then you can choose whether to stay on this scheme or switch to Tax-Free Childcare.
Clayton & Brewill can help you to calculate which scheme would be best for you – this will depend on factors including how much tax you pay and how many children you have. Click here to contact us to find out more.
You can also click here to use the government’s childcare calculator
Support for self-employed parents
The scheme doesn’t rely on employers offering it. This means that self-employed parents will also be able to get support with childcare costs, unlike the current Employer-Supported Childcare scheme. Additionally, to support newly self-employed parents, the government is introducing a ‘start-up’ period. During this, self-employed parents won’t have to earn the minimum income level.
Advice for employers
Any employees that currently receive childcare vouchers through the Employer-Supported Childcare scheme will need to decide whether to stay on this scheme or switch to the Tax-Free Childcare scheme.
