Tax-Free Childcare: latest developments

The government’s Tax-Free Childcare scheme, which started in April 2017 for those with children aged under two, is being extended to all eligible parents in two further tranches: 

  • On 15 January 2018 the scheme was opened to all parents whose youngest child is under nine (or whose ninth birthday is on 15 January 2018)
  • On 14 February 2018 the scheme is expected to open to all remaining eligible families, ie, those with children aged under 12. Applications are already open for disabled children who are eligible if under 17. 

Tax-Free Childcare offers working parents with children under 12 (or under 17 if disabled) up to a maximum of £2,000 per child per year (or £4,000 for disabled children). For every £8 paid in, the government will add a top-up payment of £2, subject to the maximum. 

There are income rules: the scheme is not available if the income of a parent or their partner is more than £100,000 and there is also a minimum income threshold (further details on the link below). 

The scheme is operated through an online account accessible through the Childcare Choices website. Applications for vouchers for 30 hours’ free childcare for working parents with three- and four-year-old children are also made through this website. 

Choosing the most favourable option

The website includes a calculator to allow parents to check which of the various childcare schemes is most favourable in their particular circumstances. Families may find that they are better off with current schemes such as employer-provided childcare or childcare vouchers. 

Childcare vouchers are to be closed to new joiners in April 2018 but parents already using childcare vouchers can continue to do so after this date, if still provided by their employer. 

The interaction between these schemes and Tax-Free Childcare and with the childcare elements of tax credits and universal credits is complex and careful analysis of the best option is advised. 

Technical issues with the website

There have been very significant technical issues with the Childcare Choices website, to the extent that a formal compensation scheme for those who were unable to access their account has been introduced. We understand that these issues should now mainly be resolved. 

Treasury Select Committee inquiry

The Treasury Select Committee announced a childcare inquiry earlier this month and the deadline for written submissions is 9 February 2018.