The Government Announcement On Tax-Free Childcare

The Government Announcement on Tax-Free Childcare

In the 2016 Budget, the Government announced that Employer supported Childcare Voucher Schemes will be able to continue to accept new entrants to schemes until April 2018.

eSlip Payroll welcome Tax-Free Childcare and the increase in funding that has been made available to parents to help them with the cost of childcare. We welcome the extension of the benefit for self-employed workers, something we have been campaigning for.


What is the new scheme? How will it work? Who stands to benefit or lose out? What should employers do now?


How will the new scheme work?

The proposed scheme will allow parents to be able to buy vouchers online to pay for childcare from early 2017.


The government will add 20p for every 80p that the parent puts in up to a limit of £10,000. If parent claims £10,000, he or she will pay £8,000 and receive £2,000 as government subsidy.


Childcare Vouchers on the new scheme will be available to pay for childcare for children under 12 years old.


The scheme will operate in quarterly entitlements – a parent will be entitled to support for three months, but will then need to reconfirm their status and details every three months.


Will all working parents qualify and benefit from the new scheme?

Many working parents will benefit from the new Tax-Free Childcare scheme. However many working parents will not be eligible for the new scheme. As an example, both parents in the household must be working in order to qualify for the scheme. The existing Employer supported Childcare Voucher scheme will therefore be important for this group.


Many working parents would be financially better off in the existing Employer supported Childcare Voucher scheme.


In general, those with lower on-going childcare costs (few days per week) or periodic childcare costs such as holiday camps will quite often be better off in the existing scheme.


How will the new scheme affect my existing Childcare Voucher scheme?

All working parents in receipt of Childcare Vouchers from their employers’ scheme before the introduction of the new scheme will continue to receive these vouchers with the same financial benefits.


After April 2018 the scheme will be frozen to new entrants. It is very important therefore working parents who would be better off in the employer scheme are actively encouraged to join before the deadline.


If you have any questions or need further advice, get in touch with eSlip Payroll and we will be happy to help.

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