The Government’s Childcare Choices website is now up and running in preparation for the launch of the new tax-free childcare scheme on 28 April 2017. The scheme is to be rolled out gradually throughout 2017, with parents of children under 2 being invited to join the scheme first. Under the scheme, parents with children under the age of 12 (or under the age of 17 where the child has disabilities) can open an online account and pay in funds which can be used to pay for childcare provided by a registered childcare provider. For every £8 deposited by the parents, the Government will add another £2, up to a maximum of £2,000 per child per year (£4,000 where the child is disabled). To benefit from the scheme, parents must be in work and earn at least £120 per week (although each parent must have income of £100,000 or less). The self-employed are also able to join.
So where does this leave clients either benefiting from or providing exempt childcare under the existing scheme?
Currently, an exemption is available for the provision of childcare vouchers or employer-supported childcare provided by the employer, worth £11 per week where the employee joined on or after 6 April 2011. The current scheme will remain open to new entrants until April 2018, and once in the scheme employees can remain in it as long as their employer continues to offer it. Alternatively, they can switch to the new scheme.
Under the existing scheme, the exemption is worth £572 a year. By contrast, parents can benefit from Government help of 20% of their childcare costs up to £2,000 per child per year under the new scheme. If childcare costs are more than £2,860 per child per year, it will generally worth switching, unless the parents earns more than £100,000, in which case it is better to remain in the existing scheme. But there is no substitute for doing the sums.