Childcare That’s Tax-free – Budget 2017

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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.

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 🙂

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About Author

I’m Fran: wife, mother-of-three and freelance publicist. My love for communicating and writing mirrors my passion for trying to be the best mum I can be. I love good food & wine, Italian culture and football and have a keen interest in personal finance. I also blog over on TalkMum and Habyts, and write sporadically for a number of other sites.

2 Comments

  1. Nikki Parrott on

    This is great but why do those that earn 100k + get stung.
    I know of families that earn marginally less each so obviously have a joint income of almost 200k but still qualify for various benefits/perks but because only one of us works and earns 100k we get nothing

    • Yes, it’s a bad way of setting a threshold as it isn’t fair. As you say, you could have a couple on a joint income of £199,999 qualifying and then a couple where one is earning £100k exactly not qualifying. Child benefit is exactly the same! I think something like financial help with childcare should be available to everyone with extra help for those that really need it. Another bug bear of mine is that many people end up at breakeven when they reconcile their childcare costs with their wages.

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