Tax-free childcare – Roll-out extended to families with a child under the age of 6

Tax-Free Childcare extended to households where the youngest child is under the age of six.

At the start of the year Employers For Childcare launched the Big Changes, Big Choices guide to explain the Government’s new Tax-Free Childcare scheme.  Tax-Free Childcare allows eligible families to claim 20% of their registered childcare costs from the Government up to a maximum of £2,000 per child, per year – £4,000 if the child has a disability.

The introduction of this scheme marked a big change to the landscape of financial support available to help parents with childcare costs.  Employers For Childcare brought together all the relevant information in one guide, so parents could make an informed choice about what financial support best suited their needs.  This guide includes a comparison of Tax-Free Childcare and Childcare Vouchers, some practical examples of difference scenarios in which parents are better off on one or other scheme, and the answers to frequently asked questions.

Since Tax-Free Childcare was launched in April, Employers For Childcare has stayed abreast of developments and updated the Big Changes, Big Choices guide accordingly.

Initially the scheme was only open to parents with a child born on or after 1 April 2013 and / or a child with a disability. From 24 November 2017 the scheme extended to households where the youngest child is under 6 or had their sixth birthday on that day. The Government intends that all eligible parents will be able to apply by the end of March 2018 (this has been pushed back from the end of 2017).

What has happened since?

Since the launch of Tax-Free Childcare, parents and childcare providers have been in touch with us about problems they have had: either accessing the service to register for the scheme; or being able to register for the scheme but not being able to access their accounts to pay money in or transfer money out to their childcare provider.  We are also aware of parents experiencing problems when they reconfirm their eligibility as required every three months.  Have you experienced this?  If so, please get in touch by calling us free on 028 9267 8200.

Some parents have been able to register to use Tax-Free Childcare without difficulty and, where it is in a parent’s best interests to use Tax-Free Childcare we will always advise them of this.  However, we are concerned that some parents will make a switch to Tax-Free Childcare without having all of the information they need and could end up out of pocket as a result.  We would urge all parents who are considering making a switch to Tax-Free Childcare to contact us before they do so.  In some cases, parents will be better off using Childcare Vouchers, accessing Tax Credits or Universal Credit, or using a combination of these.  To October 2017, 67% of 4,641 callers to our Family Benefits Advice Service were better off on Childcare Vouchers or Tax Credits, or a combination of both, rather than Tax-Free Childcare.

Parents who have registered to use Tax-Free Childcare cannot use Childcare Vouchers and are no longer eligible for Tax Credits or Universal Credits.  The Childcare Voucher scheme is currently scheduled to close to new entrants from April 2018.  Parents who are already using the scheme at that time will be able to continue to do so.  However, if a parent leaves the scheme then they may not be able to opt back in, even if they find that they are worse off.

Employers For Childcare is urging parents to think carefully and seek advice about whether they will be better off switching to Tax-Free Childcare for help with their childcare costs, before they make a change that is irreversible.

We are lobbying for the Childcare Voucher scheme to be kept open to new entrants alongside Tax-Free Childcare so that parents can choose the form of support that best suits their needs.  Please contact us if you would like to discuss this in more detail.

Do you need help working out what is best for your family?

We know working out what financial help you need or best suits your family can be complicated and we are here to help.

Employers For Childcare’s Family Benefits Advice Service was specifically set up to ensure families claim the best support available to them, particularly with childcare costs.  Call us today on 0800 028 3008 to get free, independent and confidential help and advice.  One of our trained advisors will carry out a free personalised calculation setting out which form of financial support is best for you.