Still confused about Tax-Free Childcare?

Recently we posted a Tax-Free Childcare update on our website and since then we have had numerous questions from parents who are finding it difficult to understand how the scheme will work. To clear up some of the confusion here are some of the answers to the main questions we have been asked:

Will all childcare providers be able to accept payment through Tax-Free Childcare?

Yes, all childcare providers registered in the UK will be able to accept payments through Tax-Free Childcare. Each childcare provider must register with HMRC to accept payment from parents. During the remainder of 2016 childcare providers will be invited by HMRC to complete their Tax-Free Childcare registration. Only those who register will be able to accept payment. Childcare providers can still register once the scheme is introduced to parents, however, it can take up to 12 weeks to fully register.

Can cross-border workers join the scheme?

Eligibly criteria states that parents employed in the UK will be eligible, this extends to those living in Ireland and working in Northern Ireland. However, you must be using a childcare provider who is registered in the UK.

Can I switch between Childcare Vouchers and Tax-Free Childcare?

You will be able to switch between the schemes until the Childcare Voucher scheme closes to new entrants in April 2018. At this point only those using the Childcare Voucher scheme will be able to keep using it. If you leave the scheme or are not a member at this point you will no longer be eligible.

How will Tax-Free Childcare affect my Tax Credits?

You cannot claim both Tax-Free Childcare and Tax Credits. If you join the Tax-Free Childcare scheme your Tax Credits will be terminated and you will remain ineligible while you are still a member of the scheme. This affects both Child Tax Credit and Working Tax Credit. None of the guidance issued about Tax-Free Childcare for parents or childcare providers mentions this impact so if you claim Tax Credits it is important you are aware of this before considering joining Tax-Free Childcare. You can claim Childcare Vouchers and Tax Credits simultaneously.

Will my family be financially better off on Childcare Vouchers or Tax-Free Childcare?

This will depend on each family’s individual circumstances, you can find more information about understanding how both schemes work and the savings your family can make in our ‘Will You Be Better Off on Tax-Free Childcare or Childcare Vouchers’ Factsheet. Our Childcare Savings Calculator can also help you decide whether your family will be better off on Childcare Vouchers or Tax-Free Childcare.

Any other questions?

If you have any other questions you can contact our Family Benefits Advice Service on 028 9267 8200. Our team can offer free, confidential and impartial advice based on your circumstances and carry out better-off calculations.