At the beginning of 2017, we were getting quite excited about the forthcoming rollout of the new Tax-Free Childcare scheme. For the first time, self-employed parents would be eligible for tax relief on their childcare costs. The scheme is now available to all eligible working parents. If you haven’t applied yet, we explain the benefits of the scheme and how it works.
The scheme has had a phased launch, with parents of the youngest children being able to apply from April 2017. The initiative is now half way through its roll-out period and by the end of the year all eligible parents can apply.
Tax-Free Childcare Account
Parents can potentially qualify for £2,000 from the government towards their childcare costs.
Once you qualify for the scheme, you will have a Tax-Free Childcare Account which you can access online via the gov.uk website. For every £80 you pay to your childcare provider, the government will contribute an extra £20. Paying for childcare is simple: when the account holder pays money into the childcare account, an additional 25% from the government is also credited to the account. You can then add the name of your childcare provider and pay them directly from the account.
Annual childcare costs of up to £10,000 per child can be covered by £8,000 of payments by the parents and £2,000 by the government. The maximum amount of top-up payments available for childcare for a disabled child is £4,000.
This is the first childcare scheme that provides a tax break for the self-employed (hence our excitement). There are certain conditions that must be met to be eligible, such as a minimum and maximum earnings limit for both parents. The rollout has not been without its problems but many parents are now using their accounts and enjoying the benefits.
The government has launched the Childcare Choice website to guide parents through the various types of childcare support available.
The scheme is not just for the self-employed – who have previously been exempt from schemes such as Childcare Vouchers – employees will also potentially qualify. If you are an employer, we recommend you direct your employees to the Childcare Choices site.