Fair care news

Tax Free Childcare - Update

Whilst the legislative process is complete, we are still waiting for confirmation of start dates for the government’s new Tax Free Childcare scheme.  The autumn 2015 start, originally suggested, now seems very ambitious.

We are waiting for further announcements from government.  In the meantime, for those wishing to learn more about the proposed Tax Free Childcare scheme, the key points to note are as follows:

What is it worth?

  • The benefit is worth up to £2000 per child, per year, payable as a top-up to a Tax Free Childcare account. (£4000 if the child is disabled)
  • The government will contribute 25% of whatever is paid in by parents/partners, intended to reflect 20% of the total cost.  To get the maximum of £2000, £8000 has to be paid in first. 

Eligibility

  • The benefit applies to children up to the age of 12 (17 if that child is disabled)
  • Both parents/partners have to be working, either employed or self-employed (current indication is that both must earn at least £50 per week to qualify as working).  Neither parent/partner can be receiving tax credits, universal credits or be earning over £150,000 per year. 

Practicalities

  • It is intended that there will be no employer involvement in the new scheme.  Accounts will need to be set-up directly by parents/partners; which will be administered by the government’s bank, NS&I.
  • Parents/partners will have to apply through the government gateway and will need to log on to update their eligibility every 3 months.  There will be cross-checks with the universal credits system as part of the verification process.
  • Payments can be made into the account by parties other than parents, e.g. grandparents/godparents, with the top-up still applying.  Refunds can also be requested at any time.

The current Childcare Voucher Scheme (Employer Supported Childcare)

  • When Tax Free Childcare starts, the current Childcare Voucher Scheme will be closed to new entrants, but will remain in place for existing members for as long as their employer wishes to operate the scheme, or until they change employment.  Once they leave the Childcare Voucher scheme they cannot re-join.

Winners and Losers

  • There are a number of questions that need to be answered before it can be established whether a parent is better off staying with Childcare Vouchers or joining the new Tax free Childcare scheme.  In many cases the differences will be marginal.  The calculation is quite involved but online Calculators will be available to help with the decision making process. 
  • Parents should keep their options open.  If they are not already in the Childcare Voucher Scheme, they may wish to join Childcare Vouchers before Tax Free Childcare starts, even if the voucher value they choose is nominal (as long as they are already in the Childcare Voucher scheme, parents can increase the voucher value to the maximum at any time in the future after Tax Free Childcare starts).
  • Parents cannot be in both schemes, once they leave Childcare Vouchers there is no option to re-join.

Fair Care’s view

Whilst any support for working parents is to be applauded, we believe that there will be much confusion as a result of the introduction of Tax Free Childcare.  In many cases, parents will not be any better off, and the complexity of the new scheme may deter many from applying.

Fair Care will be on hand throughout the transition process to assist employers and employees alike, and remains wholly committed to the effective operation of its proprietary Childcare Voucher operation in the coming years.

 

If you have any questions, please contact the Fair Care helpdesk on 0800 652 4745