The Tax-Free Childcare scheme will be available to around 2 million households.

In his Budget statement today, Philip Hammond said the ‘flagship’ scheme will be rolled out to all eligible parents by the end of the year with parents of the youngest children able to apply first.

Hammond also confirmed that from September 2017 working parents with three and four year olds in England will see their free childcare entitlement double to 30 hours a week, in total worth up to £5,000 for each child.

“By the end of this parliament, government spending on childcare will have reached £6bn a year,” Hammond said.

“These childcare measures represent a further huge step forward in support for ordinary working families, and for women in the workplace.”

How the new Tax-Free Childcare policy works

Parents will be able to open an online account on the gov.uk website, which they can pay into to cover the cost of childcare with a registered provider.

For every 80p they or someone else pays in, the government will top up an extra 20p up to a maximum of £10,000 a year. So, that could mean the equivalent of up to £2,000 worth of support per child per year (or £4,000 for a disabled child).

The scheme is available to all working parents, including the self-employed.

To be eligible, parents have to be in full or part-time work, with each earning at least £115 a week and not more than £100,000 each a year. They can have a combined income of over £100,000.

Parents and anyone else (grandparents, employers) can pay money into their childcare account when they like – they can pay in more in some months than others.

Childcare vouchers

The new Tax-Free Childcare policy is different to the current childcare voucher scheme, which closes to new entrants in April 2018. Parents registered by this date will be able to continue using the childcare voucher scheme for as long as their employer offers it and will not have to switch to the new system, unless they want to.

Unlike the current childcare voucher scheme, the Tax-Free Childcare system does not rely on employers offering the scheme to parents so this is good news for those who work for companies that don’t offer childcare vouchers or are self-employed.