Tax-Free Childcare Scheme

At long last there is an opportunity for the self-employed and other parents who do not have an Employer Provided Childcare benefit to access a certain amount of tax-free childcare under a new scheme launched by the government in May of this year after much delay.

Essentially the scheme allows eligible parents to open a ‘Childcare Account’ online into which the government will contribute an additional 25% to any of their deposits – very similar to the way in which the ‘tax free’ element of a pension scheme works. The parent can then use these funds to pay for their childcare, so long as this is with a registered provider.

How much you as a working parent pay, and when, is entirely up to you, however there is a maximum contribution the government will make of £2000 per child per annum.

In order to qualify for Tax-Free Childcare you need to meet the following criteria:

  • be earning more than £120 per week (on average, or £6240 per annum)
    • and less than £100,000 per year
  • be paying for registered childcare for children under 12
    • or under 17 if they are registered disabled
  • not be in receipt of other childcare support
    • such as Child Tax Credit

While this is a welcome relief to parents who before now have been denied any support with childcare due to their working circumstances, the vast range of options available can seem like a bot of a minefield, and it can be difficult to determine what the best choice is for you. If you are unsure as to your options, we would suggest you have a look at the recently launched government Childcare choices website while will guide you through the various options available to you.

Or have a look at Mercia’s more in-depth article on this topic here.

As always, if you have further questions on this matter, please don’t hesitate to contact us … / 0161 0161 456 9666

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