Tax-Free Childcare – are you eligible?

It is frustrating to see headlines reporting that only one fifth of eligible families are taking advantage of the new Tax-Free Childcare system which provides help with the costs of childcare. There appear to be several reasons for this, including confusion about the options, a lack of publicity and parents wanting to stick with the old Childcare Voucher system.

Childcare voucher schemes were closed to new applicants in October 2018 and replaced by the current Tax-Free Childcare scheme (TFC).

TFC provides up to £2,000 pa towards the cost of childcare for each child and is payable towards approved childcare via an online account. Application is online.

One of the more significant features of the new scheme is that it is open to both employed and self-employed individuals; the old childcare voucher system was only available to employed people. It is estimated that an additional one million families will qualify for help under TFC. Another important feature of TFC is that it is paid per child, not parent which allows single-parent households to access the same amount of help.

Am I eligible for the TFC scheme?

You (and your partner, if you have one) are eligible for TFC if:

· you’re in work or receiving parental leave, sick leave or annual leave

· you each earn the National Minimum Wage for 16 hours each week (this equates to £125.28 for those aged 25 & over)

If you started a self-employed business less than 12 months ago, the earnings limit doesn’t apply to you.

You’re not eligible if any of the following apply:

· either you or your partner earns above £100,000 pa

· the child is your foster child

· the child doesn’t usually live with you

·you’re from outside the European Economic Area and your UK residence card says you cannot access public funds

Can I still claim Childcare Vouchers from a scheme I was registered on prior to Oct ‘18?

Employees can continue to receive the vouchers after October 2018

·if you’d successfully enrolled on a CV scheme before that date

· if you stay with the same employer and

· providing you don’t have an unpaid career break greater than a year

We can advise you on your options and help you to understand the new TFC system. There are other arrangements still possible under UK tax regulations which employers can offer, resulting in a tax reduction for the employer and employee. Such schemes include the ‘Cycle to Work’ scheme and certain pension arrangements.

To find out how we can help you and your business save tax, please email [email protected] or call 01527 558539.  Further information about our services can be found here.

Tax-Free Childcare

Tax-Free Childcare