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 … askus@in-accountancy.co.uk / 0161 0161 456 9666
