Tax-free childcare accounts can now be opened by all eligible parents who have children aged under 12, or under 17 if the child is disabled. For every £8 the parent deposits in the account the Government will contribute £2, up to a maximum of £2,000 of Government support per child per year. Those limits are doubled for disabled children.
There have been some technical problems which have held up applications for the tax free childcare accounts and prevented some parents from accessing the money held in their accounts. If you have been affected by those technical faults they may be eligible for compensation.
Parents who open a tax-free childcare account are not supposed to double-up their child care support by also receiving childcare vouchers or directly paid for childcare from their employer. The parent should tell their employer in writing, within 90 days of opening their tax-free child care account, that they have opened that account, and the employer should take that employee out of the childcare scheme.
All employer provided childcare voucher schemes must close to all new entrants from 6 April 2018. Where the youngest child is age over 11 but under school leaving age, the parent won’t qualify for a tax-free child care account, but will qualify for employer provided childcare vouchers if they join the scheme and receive their first voucher before 6 April 2018.
Childcare vouchers are often made available to employees using a salary sacrifice scheme. To take advantage of childcare vouchers through salary sacrifice the employee must first sign up to a new contract before the start of the pay period in which he or she becomes entitled to the new lower amount of salary. For employees paid for each calendar month the last day the new contract can be signed is 31 March 2018.
Written by the Tax Advice Network