Parenting tips from the professionals: Tax free childcare

Parenting tips from the professionals: Tax free childcare

Tax Free Childcare: what does it mean for me? Stephanie Rough, Corporate Childcare Manager at Parental Choice, explains how to get to grips with the new system.

Since April 2017 the Government has launched a new system called Tax Free Childcare offering a new form of childcare vouchers and also increased free childcare hours but what does it all mean? 

Childcare Vouchers

Tax-free Childcare is the new online service from the Government to help parents with funding towards the cost of childcare. Company Childcare Vouchers will become known as “Employer Supported Childcare” and Tax-Free Childcare will eventually replace the childcare voucher scheme.The government will pay £2 into the account for every £8 paid by the parent, into the account. This is equal to a maximum of £2,000 every year. Parents will then be able to pay their childcare provider (Nursery, Childminder or Nanny) directly from this account.The childcare provider must also be set up on the system and will need to be Ofsted registered.

Am I eligible for the new government scheme?

Yes if

  • Both parents are working or are self-employed
  • Both earn over £120 per week

No if

  • Either Parent earns over £100,000 per annum 
  • Two-parent households when only one parent works

Should I remain in my company childcare voucher scheme?

If you don’t meet the eligibility criteria above and your Company offers childcare vouchers then definitely yes! If you are already signed up to a company scheme then probably yes! Employer run schemes have the benefit of being very simple to join and administer as an employee with excellent support systems either through the company director the childcare voucher provider and thus many may favour this system unless there are much greater financial benefits in changing.

If you are already supported by your employer supported childcare voucher scheme, you will NOT be able to use both options at the same time and must decide which is best for you. Corporate Childcare voucher schemes will be open to new entrants only until April 2018 and will remain running until the Company decides to stop offering such a benefit. 

15 hours Free Childcare

All children, in England, aged 3 and 4 are entitled to 15 hours free childcare. This is available at participating nurseries, pre-schools, childminders and sure start centres and from 1 January, 1 April or 1 September following your child’s 3rd birthday.Your nursery or childcare provider will inform you as to when you use these 15 hours and they are only applicable for 38 weeks a year.

30 hours Free Childcare

There are changes due in September 2017 to the free childcare entitlement and those that meet the same eligibility criteria will also be entitled to an additional 15 hours (thus totalling up to 30 hours free childcare) for 3-4 year olds.  

Does free really mean free?
As with the 15 hours, the 30 hours free is only for 38 weeks a year (roughly in line with school terms) and therefore if you use a nursery offering 50 weeks cover you will receive less than 30 hours free a week and you will receive an invoice for the extra hours you receive.

Will Nurseries offer 30 hours free?
Most will offer some form of additional hours but there will be limitations.  Within the nursery industry there has been a lot of concern that the new scheme will provide them with financial issues as the money they receive from the government does not cover their costs, particularly in some areas of the country.   Nurseries will not be able to charge extra fees for the 30 hours but you may find that they start charging for extras, such as food, or structure their hours in a way that you are still liable to pay for certain attendance. 

Plan ahead
It is important to fully understand the financial implications of such changes, discuss with your nursery their plans, and check whether you would be eligible. 

What next?

Many parents will be better off under the current system but Tax Free childcare will provide savings for some parents.Therefore, we encourage you to use the government calculator to help calculate what you are entitled to and which system will be better for you based on your personal circumstance.For parents with a child who is 3 on 31st August 2017 you can register now for Tax Free Childcare and the 30 hours, for parents with all other children you can register to be contacted when applicable.

For more information see the links below:

Childcare Choices – what is available 

Childcare Vouchers: better off calculator

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Parental Choice (www.parentalchoice.co.uk) are established and trusted childcare experts providing a unique service to both working parents direct and corporates looking to support their working parents.  They help parents find the right childcare for long term childcare solutions whether this be hiring a nanny, finding a nursery, a child-minder or a school, and will give full information and advice along the way.  In addition for anyone employing a nanny, Parental Choice supplies payroll, insurance and employment contract services. They look after everything that will allow parents to reduce the stress and hassle that is often involved in combining a career with childcare!

Released On 11th Jul 2017

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