Back in 2013 the Government announced a new tax break for working parents, providing help with paying for much needed childcare.
In this blog we take a look at what the scheme entails, how you can take advantage of the scheme, and when it becomes available.
What is the Tax-Free Childcare Scheme?
Effectively, the scheme allows parents to pay into an online account in the same way as they would pay into a regular bank account. The Government also pays into this account, which is then used to pay for part or all of your child’s care costs.
Who can apply for the scheme?
Anyone can apply, as long as:
- your child is aged 12 and under (or if your child has a disability, 17 and under)
- you and your partner are in employment, and expected to both earn a minimum of £115 per week (but no more than £100,000 per year)
- This scheme is also available to self-employed parents, who will not have to earn the same minimum amount as those who are in permanent employment
How does it work?
- For every 80p paid into the account, the Government will pay in 20p
- There’s a limit of £2,000 per child, per year (£4,000 per child, per year for disabled children) for parents receiving support towards their childcare costs
- Anyone is able to pay into the scheme, so if you have a generous grandparent, godparent or friend, they too can contribute!
- The money collected can only be used to pay for childcare that’s provided by a carer who is registered to receive a Tax-Free Childcare payment. Check whether your current childcare provider is registered here
- You cannot qualify for this scheme if you currently receive childcare vouchers from your employer or if you already receive free or subsidised childcare
- You will lose the Government’s contribution if you draw the money out rather than using it for childcare
When does it become available?
For some parents it will be available from Spring 2017, but others will have to wait until much later in the year as the scheme is being rolled out gradually. Those parents with the youngest children will be first in line to try it out.
How can you register your interest?
Register at gov.uk to ensure you’re on the Government’s radar for this scheme. You will receive an email that will let you know when you’re able to start an account.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.