Tax-Free Childcare UK

For those of us who don’t know, the UK will be introducing a “tax free” scheme to assist working parents with childcare costs.

Working parents currently have the “childcare voucher” system in place where you can pay part of your childcare fees from your gross (pre-tax) salary invariably this means it has to be offered by your employer. Another feature is that it depends on how much you earn [£243 for a Basic rate tax-payer @20%, £124 for the Higher rate @40% and £110 for the Additional rate @45%] which translates to a maximum monthly saving of £52 (£124 @ 40% tax + 2% NI) for the higher rate taxpayer and £77 (£243 @ 20% tax + 12% NI) for the basic rate taxpayer. For more information on Childcare vouchers, click here

The new tax free scheme, on the other hand, will have a more flexible approach. Some key features;

  • “Tax free” element equivalent to 20% – govt pays 20p for every 80p you pay in (up to £2,000 per annum)
  • Not tiered into thresholds like the childcare vouchers – all eligible working parents get the same top-up (parents of disabled children get £4,000)
  • Online account which parents and anyone else can pay into at any time (birthday presents sorted!)
  • All working parents could be eligible i.e. does not rely on employer supporting the scheme (max. income per parent – £100,000 per year)
  • Self-employed could be eligible

Aside from the fact it starts much later – 2017, the other issue I have with this scheme is the fact that the extra topped up by the government is capped at £2,000 per child (£4,000 for disabled children) per annum however it still appears to be the better option – you can see the growing pot of childcare money which you can then pay to your childcare provider at a go rather than splitting between vouchers and cash.

The scheme is expected to roll out early 2017 so be on the lookout. You can also check out a more detailed outline of the scheme on the official UK government website – Tax-free childcare

Have a blessed day ahead! And Happy Thanksgiving to my StateSide folks💋



Author: fabmomma

Young and quirky momma of two, sharing my experiences as I trudge through life...

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