Tax-Free Childcare — the end of childcare vouchers?

Overview

On 4 October 2018, all childcare voucher schemes closed to new applicants due to the replacement Tax-Free Childcare scheme. However, any individual who received a childcare voucher before this date may remain on the scheme as long as they do not change employer or take an unpaid career break for longer than a year.

Current recipients of childcare vouchers are able to join the Tax-Free Childcare scheme but may not continue to claim childcare vouchers following 90 days after a successful application has been made.


I am an employer, how does Tax-Free Childcare impact my business?

New applications to join your childcare voucher scheme may not be accepted from your last September 2018 payroll, as the vouchers must have been processed before the 4 October 2018. As Tax-Free Childcare is managed by individuals directly, and not as a benefit through the employer payroll, you will have no financial responsibility for this scheme. Therefore it may prove beneficial to promote Tax-Free Childcare across your business.

Consultation is advised if you wish to cease your current childcare voucher scheme due to this being a benefit entitlement for current members.
 

Who can claim?

To be eligible for Tax-Free Childcare, the following criteria must be met:

You and your partner (if you have one):

  • are employed and working a minimum of 16 hours a week;
  • are each earning at least the National Minimum Wage or Living Wage;
  • have an individual taxable income of under £100,000;
  • are eligible to access public funds.
Your child:
  • is under the age of 11 on 1 September;
  • lives with the applicant;
  • is not fostered.

What options do I have if I am not working?

You can apply for Tax-Free Childcare if you are starting or re-starting work within the next 31 days. If you are on parental leave, you cannot apply for the child you are on leave for but may apply for your other children (if applicable). You may still be eligible if your partner is working and you receive any of the following:

  • Incapacity benefit;
  • Severe Disability Allowance;
  • Carer’s Allowance;
  • Employment and Support Allowance.

I have a disabled child, can I still claim?

You may receive up to £4,000 a year if your child is under the age of 17 and is registered as blind, or severely sight-impaired, or receives any of the following:

  • Disability Living Allowance;
  • Personal Independence Payment;
  • Armed Forced Independence Payment.

Can I still receive Tax-Free Childcare if I claim other benefits?

If you are eligible for both tax and 30 hours free childcare, you can receive both benefits with the Government contributing £2 (for each £8 spent) for every additional hour (after 30) that your child spends with your childcare provider.

However, you cannot receive Tax-Free Childcare at the same time as claiming:

  • Working Tax Credit;
  • Child Tax Credit;
  • Universal Credit;
  • Childcare vouchers.

The scheme which benefits you the most is dependent on your situation and it is therefore recommended you use the Government Calculator to check; www.gov.uk/childcare-calculator

Is Tax-Free Childcare available through all childcare providers?

In order to receive Tax-Free Childcare, your childcare provider must be signed up and registered with the scheme.

How do I apply for Tax-Free Childcare?

Applications take approximately 20 minutes to complete and can be made directly through the Government’s website.

You will require the following details to complete your application:

  • National Insurance number;
  • Unique Taxpayer Reference (if you’re self-employed).

If successful, a childcare account will be created where you can deposit money for payment to be made to your childcare provider.

As part of your application, you will discover if you are eligible for both tax and 30 hours free childcare.

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