Tax Free Childcare Launching Early 2017

From early 2017 working parents will be able to apply for the new Tax Free Childcare scheme. For the first time this provides government support for self-employed as well as employed people.

Employers will have no direct involvement in Tax Free Childcare but you may well get questions from employees. There will also be implications for those who currently operate employer supported childcare voucher schemes. Employers will lose the reduction in NI contributions they currently get through salary sacrifice if staff transfer to the new scheme.

To be eligible, families must have all parents in work and earning more than £115 per week and less than £100,000 per year. Parents temporarily absent from the workplace (for unpaid maternity, paternity or adoption leave for example) will still be eligible.

Working parents will need to open a dedicated online childcare account. This will be used to pay childcare providers who are registered on the scheme. Support is available for children up to the age of 12, or 17 for children with disabilities.

For every 80p parents pay into the account the government will add 20p, up to a maximum government contribution of £2000 per year per child (£4000 for children with disabilities). The contribution equates to the basic rate of income tax, hence the name.

Employers can continue to run employer supported schemes for existing members for as long as they wish but these schemes will be closed to new entrants from April 2018.

There’s more information on the gov.uk website

 

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