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Tax-free childcare: the Govt wants your views

Tahmina Mannan
Written By:
Tahmina Mannan

The Government is asking parents for their views on how best to introduce the new Tax-Free Childcare scheme for working families.

Under the scheme, which was announced during this year’s Budget, families with two working parents could claim up to £1,200 a year per child.

Once fully up and running, the scheme will be available to up to 2.5 million families and will save a typical working family with two children under 12 up to £2,400 per year.

This Government is inviting views from parents, childcare providers, employers and current and potential future voucher providers on a number of detailed proposals for the design of the new scheme.

As well as the usual technical document, the Government is also running the consultation through an online questionnaire.

The consultation sets out new detail on eligibility for the scheme, including stating that parents who are not working because they are on parental leave or because they are carers will also be able to claim.

It also proposes that the scheme will be aligned to the school year so that children in the same class are treated consistently.

In the first year of the scheme, starting in autumn 2015, children born in or after September 2010 will be eligible (i.e. under five and younger five year-olds).

This will increase to 6 in the second year, and so on until children under 12 are eligible. Once the scheme has been fully phased in, eligibility will end in the September following the child’s 11th birthday.

Commenting on the launch of the consultation, Chancellor of the Exchequer, George Osborne said:

“This government is on the side of people who want to work hard and get on in life. Tax-free Childcare will help working parents by giving them more choice and better access to the quality, affordable childcare they need.”

Chief Secretary to the Treasury, Danny Alexander, said: “The Government wants to build a stronger economy and a fairer society and key to that is getting more people into work. We won’t let childcare costs stand in the way of parents’ ability to work if they want to.

“Tax-free Childcare will put money in families’ pockets, saving the typical two child family up to £2,400 per year on their childcare costs and allowing parents more choice to work the hours they want.”

To be eligible for the scheme, families must have all parents in work, with each earning less than £150,000 per year, and will not already receive support through tax credits (or Universal Credit in the future) or the current Employer Supported Childcare scheme.

The Government is also consulting on the detail of the £200m additional childcare support that will be available from April 2016 for working families who receive Universal Credit.

The plans published today propose that the increase in the support through Universal Credit from 70% of childcare costs to 85% will be available to families where the lone parent or both parents each earn above £833.33 in a month – the monthly income of someone who earns above £10,000 and so pays income tax.