Tax free childcare

The government’s new scheme for tax-free childcare will now launch in early 2017; it was delayed by a legal challenge.

What is the new scheme?

– only for families where either both parents are working or there is only one parent

parents pay unto an online account and for every 80p paid in the government pays in 20p. The government will pay in up to £2000 per child

– available to all employees and the self-employed

Childcare Vouchers – the old scheme

Anyone currently using childcare vouchers can continue to do so, but no new people will be admitted to this scheme from early 2017.

available to all parents (even 2 parent families where only one works)

only available to employees of participating employers

– not available to the self-employed

– salary sacrifice of up to £243 per parent per month, thus saving employees NIC at 12% and employers NIC at 13.8%, as well as tax

If you are not eligible for the new scheme you should join the old scheme while you still can. Also, the old scheme is more beneficial if you have relatively low childcare costs as you get an NIC saving as well.