In April 2017 the Tax-Free Childcare scheme was launched introducing a new way to help parents with childcare costs, whether the children were toddlers or teenagers.
The scheme works by awarding parents a government top-up of £2 for every £8 that they pay in, with a maximum top-up of £2,000 per child per year (or £4,000 for disabled children).
The Tax-Free Childcare initiative originally commenced on 28 April 2017 for those parents with the youngest children, with everyone else expected to be able to join by the end of 2017. However due to various IT difficulties the full roll out of the scheme was delayed with HM Revenue & Customs (HMRC) introducing a phased approach, to help ensure that the volume of applications could be managed effectively and prompt eligibility responses could be issued.
Thankfully HMRC have now resolved all technical issues relating to the application process and the Tax-Free Childcare scheme has been opened up to those families with children under the age of nine and HMRC say this will be extended further from 14 February to all remaining eligible families with children under the age of 12 (or 17 if disabled).
Am I eligible for the Tax-Free Childcare scheme?
To be eligible you, along with any applicable partner must be working, expecting to earn at least £120 a week and not more than £100,000 per annum and have a child under the age of 12 (or under the age of 17 if the child has disabilities). The new scheme is not provided through employers, so is open to both employed and self-employed parents.
Parents can apply for tax-free childcare online using the government’s Childcare Choices website https://www.childcarechoices.gov.uk/.
You are unable to use employer related childcare vouchers at the same time as utilising the Tax-Free Childcare scheme.
What about the old employer-supported childcare scheme?
Previously tax-relief for childcare could be provided by an employer either by employer-supported childcare, or the provision of childcare vouchers. These schemes will remain open to new entrants until April 2018. Parents already registered can choose to continue with the existing scheme for as long as their employer continues to offer it.
Whether it is worth making the switch to the new Tax-Free Childcare scheme will depend on each individuals circumstances and the taxpayer’s marginal rate of tax. For more information contact our tax team who will crunch the numbers for you to ensure you benefit from the maximum amount of tax-relief possible.
Posted: February 7th, 2018