About Tax Free Childcare

 Tax-free childcare – key points: 

  • Tax-free childcare is now being introduced to support eligible working families with their childcare costs.
  • Eligible families will receive 20% support towards their childcare costs, up to an annual limit of £2,000 government support per child.  This is equivalent of basic rate tax relief on childcare costs up to £10,000;
  • The government have stated that Tax-Free Childcare will be open to more than twice as many parents as Employer-Supported Childcare, although, depending on their circumstances, some parents will be better off in the current scheme.

A reckoner calculator has been developed by Sodoxo to help parents with decision making on whether to stay with the voucher scheme or switch across to tax-free childcare:  http://www.tax-free-childcare.info/ 

Eligibility criteria  

  • Both parents (or a lone parent) must be in paid work
  • Both parents (or a lone parent) must not be in receipt of any support through tax credits, Universal Credit or Employer-Supported Childcare; and
  • Neither parent (or a lone parent) is an additional rate tax payer (earning more than £150,000 per annum)
  • Children must be under the age of 12 (or if a child has a disability, under the age of 17) 

 

Comparison of Tax-free Childcare and Childcare Vouchers

 

Childcare Vouchers

Tax-free Childcare
Audience

Employed

All working parents, including those who are self-employed

Eligibility

Employed by a company offering a scheme

Must earn more than £8,200 per annum

All parents in work –   i.e. only parent in lone parent families or both parents

Family not in receipt of Universal Credit

Must earn more tha £115 per week

Limits per annum £2,916 (£243 per month) £10K per child (Up to 2K match by government)
Age range <16 (Under 17 if child has disabilities) <12 (Under 17 if child has disabilities
Funding mechanism  Salary sacrifice Direct payments from parents (and possibly net pay from employers)
Employer incentive Employers NIC savings None
Salary limitation Available to those earning over £100,000 Not available to those earning over £100,000
Benefits Can affect other childcare benefits, e.g. tax credits Need to opt out of child tax credits
Availability

Available to new employees until April 2018, employees currently

using Childcare Vouchers can continue to do so after April 2018

 as long as employer continues to offer the scheme

Available to new employees from 2017

 

A website detailing full choices for parents has been developed and can be found at: http://www.giveyourselfachoice.com/