Last week, the government revealed the results of its consultation and published its plans for Tax Free Childcare, due to start in September 2015. Under the new scheme, working parents who join will need to put funds into an account before receiving back the top-up from government. They will need to put in £8,000 per child per annum if they wish to receive the maximum £2,000 per child top up. (The top up is worth 20p for every 80p put in.)
Employees who are in the current Childcare Voucher Scheme (and those who join up until August 2015) will be able to stay in this scheme, for as long as they wish (or as long as their employer offers it). However, if they subsequently change employment or join Tax Free Childcare, they can no longer access the Voucher Scheme.
Employees will need to consider carefully which option they choose. The new scheme will not benefit all parents. For example, a working couple who are both basic rate taxpayers will need to be paying in excess of £778 per month in childcare costs before Tax Free Childcare is worth more than the current Childcare Vouchers. Furthermore, if either parent is not working, Tax Free Childcare will not apply.
Employers will not be involved in the new scheme. Parents will apply direct to government to join. Government is intending to use NS&I to operate the accounts and make payments to the childcare providers. Further information can be found using the following link: Tax-free-childcare-10-things-parents-should-know