In 2014, the Government unveiled their new plans to give more families access to Tax Free Childcare savings. As the current system is only available to parents whose employers have Childcare Vouchers available as an employee benefit, this means that thousands of families are missing out on vital support. The new system is being introduced in early 2017.
What is the new scheme?
Instead of being offered through employers, the new Tax Free Childcare Scheme will be provided directly from the Government through an online account. Parents will be able to pay money into their Tax Free Childcare account and the government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children). This will be applicable for children up to the age of 12 although the scheme will be applicable to children with disabilities up to the age of 17.
As the new scheme is not employer supported, self employed workers can qualify for these savings and take advantage.
What will happen to the current Childcare Voucher Scheme?
The current system will remain in place for those parents who are currently using it, but parents will no longer be able to join the existing scheme from April 2018.
Will nannies still have to be Ofsted registered to accept payments through the new scheme?
Just like under the current scheme, nannies will still need to be Ofsted registered in order to accept payment via the new Tax Free Childcare scheme. HMRC will gain their information from the Ofsted register and equivalent registers in the UK in order to communicate to nannies about the new scheme and how to prepare.
Nannies on the Ofsted register will receive letters from HMRC this summer advising them of the new scheme and inviting them to create an online account in order to accept payments from their employer via the new scheme.
Who will be able to get the new support?
In order to get the new Tax Free Childcare support, both parents in a two parent household should be working, or the lone parent in a single parent household. Parents need to be working for a minimum of 16 hours per week and should not be earning over £100,000 per year per parent. For the first time, self-employed parents will have also access to the Tax Free Childcare support. Unlike the current voucher system where both parents can claim the vouchers if their employers offer them, there will only be one Childcare Account per family and families will only be able to use the new system if both parents are working (or one parent working in a single parent household).
Parents who are claiming tax credits or Universal Credit will not be able to claim under the new system.
Who might want to stay in the current scheme?
Those who earn over £100,000 will not be able to benefit from the new scheme and therefore may want to remain in the current Childcare Voucher system. Likewise, two parent households where only one person works will not be able to benefit from the new scheme. Depending on income and how many children there are in the family, some parents may see the savings they could make decrease compared with the current Childcare Voucher system.
Source: Nannytax May 16