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The Government’s Tax-Free Childcare was introduced on 28 April 2017. Under this scheme, parents can pay into an online account to cover the cost of childcare with a registered provider. The government will then top up the account with 20% to a limit of £2,000 per child, so that contributions of £8,000 will be worth £10,000.
This is only available to families where both parents work or a single parent who works, meaning two parent households with just one working parent will not qualify. Parents must earn at least £120 per week, but not more than £100,000 per year. Unlike childcare vouchers, Tax-Free childcare is available to self-employed workers.
It is important to be aware that Tax-Free Childcare cannot be used at the same time as childcare vouchers so parents will have to choose which scheme will work best for them. The childcare voucher scheme will be phased out, so that after April 2018 no new joiners can access the scheme but those already using them can continue to do so until their children reach the age of 16.
For employees and company directors, whether Tax-Free Childcare or childcare vouchers are more beneficial will depend on your particular circumstances including the number of children, annual spend on childcare and income levels. Detailed calculations may be required to help you to make a decision.
30 hours free childcare
The existing provision of 15 hours free childcare for 3 and 4 year old children is being extended as of September 2017. A total of 30 hours of free childcare per week will be available to qualifying parents.
As for the Tax-Free Childcare, parents must earn at least £120 per week but less than £100,000 per year.
In order to join either of the above schemes, an online application must be made via www.childcarechoices.gov.uk
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