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Tax-free scheme for childcare launches

Tax-Free Childcare was first announced in 2013, after years of delays and uncertainty, it finally began to roll out on 28 April 2017.

Investing efficiently

Tax-Free Childcare is a scheme which allows parents to pay into an online account. Subject to any restrictions, the money paid in is then topped up by 25% by the government. These funds can then be used to pay for:

  • childminders, nurseries and nannies, all registered
  • registered after-school clubs and playschemes
  • registered schools
  • home careworkers working for a registered homecare agency.

The funds can’t be used to pay for unregistered providers, for example casual babysitters. Initially, only parents with a child under the age of two can register. By end of the year the scheme will be available to all working parents across the UK with children under twelve, or under 17 if disabled.

Restrictions

Per child, the maximum amount of top-up that can be received is £2,000, or £4,000 if they are disabled. Parents have to be working, and earning at least £115 per week to qualify. If either of them earns more than £100,000, they are ineligible for the scheme.

They can’t participate in the Tax-Free Childcare scheme if they receive childcare vouchers from their employer. Check out the Childcare Choices website, it’s a handy source of information on the different options. Due to the various ways of getting help with childcare costs, HMRC has published a Childcare calculator. This allows parents to compare all the government’s childcare offers and see what works best for their families, including the new 30-hour free childcare offer, Tax-Free Childcare or universal credit.

30 hours free

In addition to the new scheme, the amount of free childcare for schemes such as Surestart has been doubled from 15 hours to 30 per week for children aged three or four.

Eligible parents will be able to apply online through the childcare service. They will be given a code which they will need to take to their local authority, and this will be used to allocate the child a free place accordingly.