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Mythbuster: 30 hours free childcare + Childcare Vouchers

Posted on 19 December 2017

Update: Since this article was originally published the government has extended the deadline to join a Childcare Vouchers scheme to October 2018. The precise date in October is yet to be confirmed by HMRC. All other information provided in this article remains relevant.

 

It is a common misconception that you cannot claim both Childcare Vouchers and 30 free hours childcare for 3 and 4-year-olds simultaneously. Don’t worry, you can in fact benefit from both schemes at the same time. Many families would be better off combining these two schemes than if they claimed Tax-Free Childcare with 30 free hours.

Here are a few example scenarios. See if your family would be better off staying with Childcare Vouchers.

Two parents and one child

Lauren and Jamie are basic rate taxpayers and have a two-year-old son in full time nursery care. Currently their childcare costs are £11,100 a year so they would be better off with Tax-Free Childcare rather than Childcare Vouchers as they would save £2,000 rather than £1,866. However, when their son turns three he will be eligible for the 3-4 year old funding which will pay for 30 hours of his care. This will reduce their bill to £3,200 a year. With Tax-Free Childcare they would now only save £640 whereas they could still save £1,024 with Childcare Vouchers. So in fact, they will be better off with Childcare Vouchers.

Two parents, only one working, with three children

William is a basic rate taxpayer, while Karen volunteers 10 hours a week. Their elder children aged, six and seven are at school. Their youngest child is three and gets 30 free hours childcare at a nursery, leaving them with £4,800 to pay for childcare per year. They are not eligible for Tax-Free Childcare because Karen is in unpaid work. However they can save £933 per year with Childcare Vouchers.

Single parent with one child

Lucy works full-time and is a higher rate taxpayer. Her three-year-old daughter goes to a childminder two days a week, costing £3,100 per year. With Tax-Free Childcare Lucy could save £620 a year, but with Childcare Vouchers she would be £623 a year better off.

 

When deciding which scheme is right for your family it is important to consider your future circumstances (for example children turning 3, or one parent being unable to work), as well as your current situation.

However, the clock is ticking to join a Childcare Vouchers scheme – you must join by your March 2018 pay day, before the scheme is closed to new joiners. Those who do join Childcare Vouchers before the cut-off date can continue to benefit from Childcare Vouchers for as long as you remain with your current employer, or until your child reaches 16*.

*Until 1st September after the child’s 15th birthday, or 1st September after their 16th birthday if they are disabled.