Tax-free Childcare consultation now open

Tax-free Childcare consultation now open

tax-free childcare

A consultation giving more detail on its Tax-free Childcare scheme has been published by the government, who are now asking parents for their views on how one of the biggest government programmes to help working families with childcare costs should be run.

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 be able to claim.

The document also proposes that the scheme will be aligned to the school year so that children in the same class are treated consistently and confirms that:

  • The new Tax-free Childcare scheme will cover 20% – equivalent to the basic rate of tax – of working families’ childcare costs up to a limit of £6,000 per year per child, i.e. £1,200
  • 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.
  • To be eligible for the scheme, families will 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 scheme will be run through online voucher accounts.

Tax-free Childcare will be worth up to £1,200 per child per year. 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.

The average cost of a part-time nursery place for a child under two in the UK is now over £5,000 per year.

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