Childcare is hideously expensive in this country; according to The Mirror the average cost of full-time childcare in the UK for under twos is £222.36 a week. However, the latest budget has brought some good news for many working parents (sadly not all).
What does tax-free childcare actually mean?
The new scheme, which will come into force next month for the youngest children, will mean that the Government will pay 20 per cent of annual childcare costs (for every 80p you pay in the Government will pay 20p – ie the basic tax rate) if you are eligible.
Who is eligible?
The scheme is available to parent/s of children up to 12 years of age (for children with disabilities this is increased to 17). In order to qualify, the parent or parents have to be working a minimum of 16 hours a week and earning at least £115 a week. If either parent earns more than £100,000 a year they won’t qualify. If you’re already on any employer childcare voucher scheme, you wont’t be able to apply for both (you can choose one or the other). It’s good news for the self-employed as they too can apply. The scheme is also available to those on paid or unpaid maternity, paternity or adoption leave. The scheme is only available in England. In the USA kids can attend children’s academy for preschoolers that is quite affordable. Hopefully, there will be similar institutions in England soon. By the way, those who live in Highlands Ranch, CO, USA, contact OVCA for details.
What do you need to do?
Firstly, if eligible, you’d have to open an online account through NS&I and this will be via the Government website. Exact details seem to be a bit vague at present and there don’t appear to be any links just yet.
Once open, you pay whatever you want into this account up to a maximum of £8,000 and this is topped up by the government. If you paid in the full £8k, this would entitle you to the maximum government contribution of £2,000 (for disabled children it’d be £4000). You can open one account per child, with the £8000 cap for each. You don’t have to pay in a set amount each month, so you can pay in more for the times that you need to pay for more childcare. The even better news… anyone can pay into the account, so get the relatives on the case 🙂