Her Majesty’s Revenue and Customs (HMRC) has announced that a new tax free childcare account will be available from early 2017 which aims to help working families pay for the cost of childcare, enabling more parents to go out to work.
The online account will enable parents, other family members or employers to make contributions to pay for childcare from a registered provider, and the Government will top-up any payments made up to £2,000 per child, per year (or £4,000 for disabled children). The account will cover children up to the age of 12, and children with disabilities up to the age of 17.
Access to these accounts will be available to the self-employed and those whose employer does not provide employer-supported childcare. To be eligible for an account, both parents must be working the equivalent of 16 hours paid at the National Living Wage (NLW), and neither parent must earn more than £100,000 per year.
The Government will top-up the account by 20p for every 80p paid to a maximum of £2,000 per child, per year. Parents are able to withdraw money from the account if they wish, but the Government will also withdraw its corresponding contribution.
Current employer-supported childcare arrangements, including vouchers and contracted childcare, will continue as long as the employer is willing to provide them and the employee stays with the same employer. Employer-provided nurseries will be unaffected by the new scheme.
All parents will be eligible to apply by the end of 2017. HMRC has indicated that further details about the scheme will be released in due course. To find out more visit the HMRC website.