Sarah Laing looks at the new registration process for tax-free childcare, which is currently being rolled out to eligible parents and guardians.
Tax-free childcare is the government’s new initiative to help working parents and guardians with childcare costs. It will be rolled out nationally during 2017, and is due to replace the existing childcare voucher scheme in April 2018.
In conjunction with the rollout, the government’s new Childcare Choices website (www.childcarechoices.gov.uk) is now operative, allowing parents to find out about various types of support available, and includes details on how to register for the new scheme.
It is currently estimated that some two million working families will be eligible for tax-free childcare. It will be gradually rolled out, with parents of children under the age of two invited to enter the scheme first.
How does it work?
Under the scheme, the parent/guardian opens an online account and decides how much to pay in. Circumstances are re-confirmed online every three months. Anyone can pay into the account, including grandparents, other family members or employers, giving them the flexibility to pay in more in some months and less at other times.
By the end of the year, all eligible parents will be able to receive government top-ups of £2 for every £8 that they pay into their tax-free childcare account, up to a maximum of £2,000 per child (or £4,000 for disabled children), up to a maximum of £10,000. The scheme will be open to all working parents across the UK with children under 12, or under 17 if disabled.
Money can be withdrawn at any time, but in doing so the government contribution will be lost.
Broadly, to qualify for the government contribution, account holders will have to be in work, earning at least £120 a week, but not more than £100,000 each per year. A particular advantage of the new scheme is that self-employed people will be able to use it (employer-supported childcare is of course only available to employees). The government is introducing a ‘start-up’ period during which self-employed parents won’t have to earn the minimum income level.
Unlike the current scheme, tax-free childcare does not rely on employers offering it. Any working family can use a tax-free childcare account, provided they meet the eligibility requirements.
Switching to tax-free childcare is not obligatory - existing employer-supported childcare schemes will continue to run and will be open to new entrants until April 2018. Parents already registered by this date will be able to continue using it for as long as their employer offers it.
30 hours free childcare
From September 2017, the new 30 hours’ free childcare offer for working parents of three and four–year-olds in England will double the current 15 hours of free childcare currently available, saving eligible working families up to £5,000 a year. As with the tax-free childcare scheme outlined above, eligible parents can apply online through the childcare service. They will receive a code – this will allow parents to arrange their childcare place ahead of September 2017. Parents can take their code to their provider or council, along with their National Insurance number and child’s date of birth. Their provider or council will check that the code is authentic and allocate them a free childcare place.
Parents will be able to apply for tax-free childcare and the 30 hours offer in one go through the government’s new digital childcare service. Eligible parents can benefit from both tax-free childcare and 30 hours’ free childcare at the same time.
Practical Tip:
The Childcare Choices website includes a childcare calculator for parents to compare all the government’s childcare offers and check what works best for their families, including the new 30-hour free childcare offer, tax-free childcare or universal credit. Through the website, it is also possible to pre-register for email alerts that will notify parents and guardians when they can apply, as well as receiving notifications concerning existing government childcare schemes.
