From 28th April the government will be phasing in its new Tax-free childcare scheme. This will be open to families, where both parents are working in employment or self-employed and they can pre-register now!
This is how it works:
- Open an online account through the GOV.UK website
- For every 80p the parents contribute, the government will top up by 20p, (up to a total contribution from the government of £2,000).
- The scheme is available for children up to 12 years old, and for children with disabilities, up to the age of 17.
- Parents (this includes 'households' where one parent lives with their parnter) will both need to be working, earning more than £115 p/week and less than £100,000 per year.
- It is available for those in employment, and more crucially if you are self-employed. Currently only parents employed by an employer that offers the ‘Employer-Supported Childcare’ scheme (or Childcare Vouchers) can get help with their childcare.
- If you currently use the Employer-Supported Childcare scheme you can continue to do so, or if it is available to you and you have not used it yet, you will be able to register before April 2018.
- The childcare account is flexible and you can pay in more some months than others, so that you can build up a balance for when you need it most. Also, others may pay into the account, such a grandparents, family members and even employers.
- If your circumstances change, you can withdraw your contributions to the account and the government will withdraw their corresponding contribution.
So will this new scheme benefit you?
In a nutshell the winners with the new Tax-free childcare scheme are
- The self-employed
- Parents who have more than one child with high childcare costs.
You will be better off with the Employer-Supported Childcare scheme if:
- You are a couple where one parent doesn’t work ( and if the employed parent is offered Childcare Vouchers).
- Basic-rate taxpayer parents with total childcare costs of £9,336 or less. Under this amount, the saving you make with childcare vouchers exceeds the saving you can make with Tax-Free Childcare.
- Higher-rate taxpayer parents with total childcare costs of £6,252 or less. Under this amount, the saving you make with childcare vouchers exceeds the saving you can make with Tax-Free Childcare.
- Additional-rate taxpayers, as a higher earner you will not be eligible for the scheme anyway, whereas you will be eligible for childcare vouchers, if you entered the scheme after 5th Spril 2011.
- You have the £243 per month deducted by salary sacrifice. If instead you have it as a 'perk' you would still be better off taking the Tax Free Childcare.
But if all this seems a little confusing there is the Childcare Choices website which includes a Childcare Calculator for you to compare all the government's childcare offers to work out what is best for your family.
If you need advice on this or any other issue, contact us for a free initial meeting:
Barnstaple 01271 375271 Bideford 01237 471881
If you like this article and would like our FREE updates sent straight to your inbox then subscribe to our monthly newsletter.