Q&A: Tax-Free Childcare

Published on 20th December 2016

The new Tax-Free Childcare scheme will be rolled out in early 2017. Here we answer some key questions on the new initiative.

Q. What is ‘Tax-Free Childcare’?

A. Tax-Free Childcare is a new Government scheme designed to help parents with the cost of childcare. Under the initiative, eligible parents will be required to open an online account, into which they can contribute money to pay for childcare for under 12s (or 17 for disabled children). The Government will then ‘top up’ payments at a rate of 20p for every 80p that families pay into the account up to a maximum of £2,000 (£4,000 for a disabled child).

The scheme will be rolled out gradually from early 2017, starting with the parents of the youngest children. Information on how to apply will be released nearer the roll-out.

Q. Who qualifies?

A. To qualify for Tax-Free Childcare all parents in the household must:
 meet a minimum income level based on working 16 hours per week at the National Living Wage (including self-employed parents)
 each earn less than £100,000 a year; and
 not already be receiving support through Tax Credits or Universal Credit

Q. What about the existing scheme?

A. The existing Employer- Supported Childcare scheme (through which childcare vouchers are commonly provided) will remain open to new entrants until April 2018.

Q. Will I be better off under the new scheme?

A. This really depends on your individual circumstances, employment status and income.
Talk to us soon to assess your options – remember that after April 2018 Employer- Supported Childcare will not be open to new entrants.

Q. Will it affect employers?

A. Tax-Free Childcare is an arrangement between the Government and parents, so employers are not directly involved in the new initiative. However, with some parents likely to be better off under the existing arrangements, employers offering Employer-Supported Childcare should be prepared for any additional uptake of childcare vouchers before the scheme closes to new entrants.

We can help you plan for a more prosperous future for you and your family – please contact us to discuss your individual circumstances.