In Budget 2013, the Government announced new tax incentives for childcare. Following consultation on the design and operation of the scheme, the Government has announced improvements.
The relief will be 20% of the costs of childcare up to a total of childcare costs of £10,000 per child per year. The scheme will therefore be worth a maximum of £2,000 per child. The original proposal had a cap of 20% of £6,000 per child.
The scheme will be launched in autumn 2015. All children under 12 within the first year of the scheme will be eligible. Under the original proposal only children under five would have been eligible in the first year of the scheme.
Who qualifies for Tax Free Childcare
To qualify for Tax-Free Childcare all parents in thehousehold must:
• Meet a minimum income level based on working eight hours per week at the National Minimum Wage (around £50 a week at current rates)
• Each earn less than £150,000 a year, and
• Not already be receiving support through Tax Credits or Universal Credit.
The current system of employer supported childcare will continue to be available for current members if they wish to remain in it or they can switch to the new scheme. Employer supported childcare will continue to be open to new joiners until the new scheme is available. It is proposed that parents register with the Government and open an online account. The scheme will be delivered by HMRC in partnership with National Savings and Investments, the scheme’s account provider. The Government will then ‘top up’ payments into this account at a rate of 20p for every 80p that families pay in.
What about self employed individuals?
Self-employed parents will be able to get support with childcare costs in the Tax- Free Childcare scheme, unlike the current employer supported childcare scheme. To support newly self-employed parents, the Government is introducing a ‘start-up’ period. During this period a newly self-employed parent will not have to earn the minimum income level.