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New Tax-Free Childcare scheme: 10 things you need to know

Written by: Paloma Kubiak
Two million households will be eligible for the government’s Tax-Free Childcare scheme. Further details of the scheme were unveiled in Budget 2016. Here are ten things you should know about it.

The scheme launches in 2017

Tax-Free Childcare will be launched from early 2017 where it will be rolled out gradually to families, with parents of the youngest children able to apply first.

You’ll be able to open an online account, which you can pay into to cover the cost of childcare with a registered provider, and you can apply for all your children at the same time, when your youngest child becomes eligible.

For every 80p paid in, the government will add 20p

The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children).

It is available for children up to the age of 12

It will also be available for children with disabilities up to the age of 17.

Who qualifies?

To qualify, parents will have to be in work, and each earning around £115 a week and not more than £100,000 each per year.

You don’t need to rely on your employer to offer it

Any eligible working family can use the Tax-Free Childcare scheme – it doesn’t rely on employers offering it, unlike the current scheme Employer-Supported Childcare.

It’s available for self-employed parents

Self-employed parents will be able to get support with childcare costs in Tax-Free Childcare, unlike the current Employer-Supported Childcare scheme. The government is introducing a ‘start-up’ period in which self-employed parents won’t have to earn the minimum income level. It will also be available to parents on paid sick leave and paid and unpaid statutory maternity, paternity and adoption leave.

You can continue to receive Employer-Supported Childcare

You don’t have to switch to Tax-Free Childcare if you don’t wish to. Employer-Supported Childcare – or childcare vouchers – will continue to run but it will close to new entrants in April 2018. Parents already registered by this date will be able to continue using it for as long as their employer offers it.

However, the government says the Tax-Free Childcare scheme will be open to more than twice as many parents as Employer-Supported Childcare.

Other people can pay money into your childcare account

It’s not just parents who can pay into the account – if grandparents, other family members or employers want to pay in, then they can.

This scheme is in addition to the 30 hours free childcare entitlement 

The Tax-Free Childcare scheme will sit alongside the increase to the free childcare entitlement from 15 hours to 30 hours a week for working families with three and four year olds from September 2017.

Government aims to simplify the process

The government says it is trying to make the process as easy as possible so you’ll need to re-confirm your circumstances every three months online where you can view accounts for all of your children at once.

You can withdraw money from the account

If your circumstances change or you no longer want to pay into the account, then you’ll be able to withdraw the money you have built up. If you do this, the government will withdraw its contribution.

The government says more information will become available ahead of the scheme being launched “so parents making childcare decisions are able to consider all their options”.

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