The rising costs of childcare have been a concern to working families for some time.  In response to this concern the Government has proposed to introduce a new Tax Free Childcare Scheme (the “Scheme”) in Autumn 2015, which would replace the current childcare voucher scheme.   It is hoped that this will provide greater financial assistance to parents to enable them to work.  Under the proposed Scheme, eligible families could receive 20% of their annual childcare costs, which would be paid for by the government.

To qualify for the Scheme, all parents in the household must be in work and earn an average of at least £50 per week (there may be exceptions for certain types of workers). Parents will then be able to claim 20% of qualifying childcare costs for children up to 12 years old and for disabled children up to 17 years old. Claims will be capped at £2,000 per child per year, however, if one family member earns over £150,000 per year the family will not be eligible.   Parents will be able to take advantage of this Scheme by opening an online account which they can pay into to cover the cost of childcare with a registered provider. This account will be managed via the gov.uk website.

The Scheme will replace the current employer-supported childcare voucher scheme, which would be closed to new joiners in Autumn 2015, should the Scheme go ahead.  Employees currently registered for childcare vouchers will be able to continue to participate in the employer schemes for as long as the employer offers it, or instead they may switch to the Scheme when it becomes available. A working family will not be able to participate in both an employer-supported scheme and the Scheme.

Unlike the current scheme any eligible family can rely on the Scheme, it does not rely on employers offering it and it will also be available for self-employed parents. Parents will be able to pay money into their childcare account whenever they like and the process is intended to be as simple as possible. Parents will also be able to withdraw money from the account freely if their personal circumstances change, which is something that cannot currently be done with the current childcare voucher scheme.