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Tax-Free Childcare to Launch in Autumn 2015

Written by Jon Cooper

Tax-Free Childcare is the government’s flagship measure to support working parents with up to £2,000.00 a year for childcare costs and is due to launch next autumn. 

As a precursor, more details on how the scheme will operate have been released.

When the scheme launches, qualifying parents will be able to open an online account through the government website into which monies can be paid to cover the cost of childcare with a registered provider.  For every 80p paid into this account, the government will add an additional 20p up to a limit of £10,000.00 of which £2,000.00 will be funded by the government.

There are three important considerations:

–          There will be no requirement for the monies to be paid in by the parents allowing, maybe, grand-parents or other relatives to contribute.

–          There will be no fixed monthly amount that needs to be paid in.  Instead, there will be the flexibility to pay in a greater amount when funds allow and to build up a balance to cover periods when more childcare may be needed such as the summer holidays.

–          These amounts are per child per year.

The scheme will be available for all children up to the age of twelve and, for children with disabilities, there will be a higher age ceiling of seventeen.

To qualify, parents have to be in work and with an annual income of less than £150,000.00.

Unlike the existing Employer-Supported Childcare schemes, Tax-Free Childcare does not depend on any involvement from an employer and will be open to parents who are self-employed.

The scheme will also be available to parents on paid sick leave and paid or unpaid statutory maternity, paternity or adoption leave.

If you have chosen receive Employer-Supported Childcare, typically from a Childcare Voucher scheme, then you will be able to continue to do so.  There will be no requirement to switch to Tax-Free Childcare and Employer-Supported Childcare can continue to run for as long as your employer offers it.

However, once Tax-Free Childcare is launched in autumn 2015, parents will no longer be able to register for Employer-Supported Childcare.

The only exception will be where an employer offers a workplace nursery which will not be affected by Tax-Free Childcare.

Finally, should your circumstances change or you opt to no longer use the account, there will be the ability for you to withdraw the funds that you have built up with government extracting their corresponding contribution.

The government promises that they will make the process as simple as possible for parents with a streamlined registration and ‘light-touch’ reporting.  However, at this stage, the details of this mechanism are yet to be released.

As a result, we will be monitoring developments on Tax-Free Childcare over the next year and publishing news alerts when more information becomes available.

In the meantime, if you would like to discuss whether Tax-Free Childcare will be the best option for your circumstances, please email welcome@cooperfaure.co.uk for an initial free consultation.

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