Tax-free scheme introduced to help parents with childcare costs

By 10th May 2017 May 16th, 2017 Latest News

From the 28th April, the government has rolled out its Tax Free Childcare scheme (TFC) to help working parents with the cost of childcare.

Since 2005, employers have provided parents with Childcare Vouchers (CCVs) generally through a salary-sacrifice scheme. The Government is replacing this system with Tax Free Childcare, managed by parents themselves as opposed to employers. The new scheme originally targeted children up to two years of age, but this threshold has been raised to include children of up to four years old.

To qualify for Tax-free childcare, all parents in the household must generally meet a minimum income level, based on working 16 hours a week (on average £120 a week) and each earn less than £100,000 a year.

For every £8 a parent pays in, the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs making a total amount of £10,000. Higher limits of £4,000 and £20,000 apply to children up to 17 years old if they are disabled.

All eligible parents will be able to join the scheme by the end of 2017. Parents will be able to apply for all their children at the same time, although the government funding will start with the youngest child first. Parents will need to open an online account, which they can use to pay for childcare from a registered provider.

For employers who currently offer Employer Supported Childcare, usually in the form of vouchers, these can remain open to new entrants until April 2018. For existing members, they will have the option to remain in the their existing scheme or change to the new TFC once their child is eligible.

For more in depth information, please contact one of our experts today.

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