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The Latest on: Tax Free Childcare, Childcare vouchers, Free childcare hours, Tax Credits for Childcare & Universal Credit for Childcare

Published on 13 November 2017, by in Blog.

The variety of Childcare choices available is great for parents, but understanding the options and ensuring you are getting the most help you can is somewhat less straightforward.

With the latest, simplest, and most inclusive of the schemes ‘Tax Free Childcare’ just becoming available – now seems like a good time to provide an overview of the available options.

Tax Free Childcare

This scheme has now gone live for parents with children born on or after 1 April 2013. The main benefit of this scheme is that unlike the old Childcare Vouchers, this is available to both the employed and the self-employed -which will be welcome news to the self-employed.

It is available, or rather will be available, to working parents with children under 12 (or under 17 for disabled children).

The scheme is very simple in its operation, you simply need to open an online bank account which you must use to pay for registered childcare. The government will then top up the money you pay into that account. For every £8 you pay in, the government will add an extra £2.

You can receive up to £2,000 per child – in other words, you can pay in up to £8,000 per year per child to that account and receive credit. The limits rise to £16,000 paid in, and £4,000 credit for a disabled child.

There are some restrictions on who can use this scheme. To be eligible, you and any partner, must each expect to earn (on average) at least £120 per week. You will be ineligible if either you or your partner expect to earn over £100,000 a year.

This scheme is being rolled out to replace childcare vouchers, and so cannot be used in conjunction with those. You can however, use it in conjunction with the 15-hour and 30-hour schemes.

The scheme can be accessed via:

https://childcare-support.tax.service.gov.uk/par/app/applynow

Childcare vouchers

These are now being phased out, and replaced by the Tax Free Childcare scheme, but will still be available to parents currently using the scheme and open to new joiners until April 2018.

The Childcare voucher scheme works via a salary sacrifice arrangement. The amount of relief you get will depend on how much you earn, and when you joined the scheme, but relief can be as much as £55 per week per parent.

These schemes will be run by employers – so you should contact your employer to see if they are offering this.

For employers who may wish to make this available to your staff – there are a number of companies to whom you can outsource the service. Please contact us for more details.

The Childcare voucher scheme can be used in conjunction with the 15-hour and 30-hour schemes but not with ‘tax free childcare’.

 

Beyond these two tax incentivised schemes, there are other free or subsidised childcare options available, and these are summarised below.

15 Hours free childcare

Does exactly what it says in the title – gives you 15 hours free childcare per week, per child.

  • This is available to anyone with children aged 3-4 – regardless of income levels
  • It is also available to parents of 2 year olds, where you receive income support; or job-seekers allowance; or tax credits and have an income below £16.190 per annum.

30 Hours free childcare

Does exactly what it says in the title – gives you 30 hours free childcare per week, per child.

  • This is available to parents of 3-4 year old children where:
    • You and any partner each expect to earn
      • More than the equivalent of working 16 hours per week at minimum wage (circa £120 per week);
      • But, less than £100,000 per year.

Tax Credits for childcare

This scheme allows you to claim back up to 70% of your eligible childcare costs up to a cap of £122.50 per week for one child or £210 per week for two or more children.

  • This is available to parents of 0-15 (16 if disabled) year old children, where:
    • You and your partner are working at least 16 hours each week.

Universal Credit for childcare

This scheme allows you to claim back up to 85% of your eligible childcare costs up to a cap of £646 per month for one child or £1,108 per month for two or more children.

  • This available to parents of 0-15 year old children, where:
    • You, and your partner are working, or due to start work and are claiming Universal Credit.
 
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