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Government announcement for Childcare in 2015

Posted on 20 March 2013

You may have read in the news or seen in the press reports of an announcement the government has made about its plans for childcare funding in the UK, with a new scheme set to be implemented Autumn 2015 at the earliest which may replace the existing childcare voucher scheme.

Proposal

This new scheme would allow working parents (where both parents are working) to claim up to £1,200 per child towards the cost of Childcare.  

 They will receive 20% – equivalent to the basic rate of tax – of their yearly childcare costs up to £6,000 per child. It is not yet clear whether there is a cap on the number of children that can be claimed for.

Parents will be able to use the vouchers for any Ofsted regulated childcare in England and the equivalent bodies in Scotland, Wales and Northern Ireland.   It is not yet clear whether they would be able to use them for childcare provided by a school which is covered by the existing childcare voucher scheme.

Eligibility

The scheme is open to working parents, where both parents are working and the parent is not already getting support through the existing childcare voucher scheme, or tax credits (later universal credits).

Initially parents will only be able to claim for children up to 5.  This will build up over time to involve all children up to age 12.

This is unlike the existing childcare voucher scheme which is open to all parents with children under 15 (up to the 1st September following their 15th birthday, or 16th birthday if they are disabled) regardless of the employment status of their partner.

Making the most of the existing scheme

You will still be able to benefit from the existing Childcare Voucher scheme if you join before the new scheme is introduced in Autumn 2015. 

The existing childcare voucher scheme is open to new joiners up to the time the new scheme is implemented, which is Autumn 2015 at the earliest. At this point the scheme will be closed to new joiners. Existing scheme members will continue to receive employer funded childcare vouchers in the normal way and continue to be able to benefit if they would not be eligible for the new scheme or choose not to participate in the new scheme.

This means that if you have childcare costs and not already on the scheme, it’s worth joining now as then you’ll have the choice come Autumn 2015 and you can decide which is more financially worthwhile for your family.    

Winners and losers

As it stands there are some people who could benefit from the new scheme and some people who would be better off sticking with the existing scheme come Autumn 2015.  If you join the scheme before this you won’t lose as you will have that choice.

Based on our current understanding of the new scheme as it has been defined at this stage:

  • Two parent families where one parent does not work will not benefit from the new scheme as they are not eligible
  • Two parent families with one child under 5 where both parents work will not benefit from the new scheme as they would be financially better off getting the maximum value of childcare vouchers.
  • Additional rate taxpayers will not benefit from the new scheme as they are not eligible
  • Families with no children under 5 will not benefit for the new scheme in the first year and families with no children under 12 will not benefit from the new scheme at all
  • The self-employed will benefit from the new scheme
  • Single parents who work and have a child under 5 in childcare will benefit from the new scheme if their childcare costs are more than £5000 a year
  • Two parent families with two or more children under 5 in childcare with both parents working will benefit from the new scheme if their total childcare costs are more than £9500 a year

What now?

We look forward to working through the details with Government to ensure the scheme gives the best possible outcome for working parents, your employers and childcare providers. We will continue to make information available as and when appropriate.

For more information from HM Treasury please go to http://www.hm-treasury.gov.uk/tax_free_childcare_qanda.htm