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Our Favourite Things you Should Know About Tax Free Childcare

Everything you need to know about the Tax-Free Childcare scheme and how it will effect you

 

Childcare Vouchers have been replaced with the government's own scheme called Tax-Free Childcare. We teamed up with Co-operative Flexible Benefits and found out what you need to know.

The Employer Supported Childcare (ESC) Voucher Scheme has been running since 2005 as a benefit that employers have supplied to their employees. In 2011, the government made changes in order to make the tax savings the same regardless of what rate the employee paid.

With the new scheme, ESC will be completely eliminated as a choice for new joiners. Current users will be grandfathered in until the youngest child reaches 15, (or 16, if disabled).

Childcare Vouchers ending

But what is the new Tax-Free Childcare?

Tax-Free Childcare (TFC) is the government's plan to help with the cost of childcare for working parents. Once the scheme starts in 2017, you'll be able to open an account online (once the scheme opens) at Gov.UK to help pay the costs of registered childcare providers.

The government will provide a subsidy of 20p for each 80p paid into a childcare account. The maximum amount of £10,000 can be put in the account and the subsidy works out at £2,000. This is equivalent to the 20% most people pay in taxes, which is why the scheme is called 'tax-free'.

According to Gov.UK:

"In addition to giving support to the self-employed, the scheme has been adjusted to ensure those working part-time, earning £50 per week and above, those on maternity, paternity or adoption leave and those starting their own business who may not meet the minimum earning requirement will be included, giving them government help with childcare costs for the first time."

What you need to know about the new TFC plan:

  • Both parents must work in order to be eligible
  • Parents are required to earn at least £50 a week and no more than £150,000 per year
  • The subsidy is per child, not parent
  • The scheme is available for children up to age 12 (children with disabilities 17)
  • Both parents must be on the same plan, i.e. you cannot have one on ESC and one on TFC
  • Those who are self-employed are eligble
  • Anyone can pay into the plan, not just parents, but grandparents as well
  • You can take money out of the account, however the government subsidy will be removed
  • Quarterly submission of eligibility will be required
  • There will be no employer involvement
  • Employer's workplace nurseries aren't affected.

Will you benefit with Tax-Free Childcare?

If you're currently enrolled in the Employer Supported Childcare (ESC) Voucher Scheme plan and are trying to decide if you are better off switching to TFC, this table explains the differences between the two plans:

 

 

Tax-Free Childcare Scheme

Savings

 

Parents can save up to £2,000 per child, per year. There is no Employer saving.

Eligibility of Child

 

Available for children up to the age of 12 (17 if disabled).

Employed Parents in the Family

 

Both parents must work to be eligible (unless single parent).

Income Criteria

 

Each parent must earn at least £50 per week, with a maximum of up to £149,999.99

 

 

 
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