Tax-Free Childcare: 10 things parents should know

Tax-Free Childcare: 10 things parents should know

From Lisa Kennery

From autumn 2015 Tax-Free Childcare will be available to nearly 2 million households to help with the cost of childcare, enabling more parents to go out to work, if they want to, to provide greater security for their families.


Here’s the top ten things to know about the scheme…

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1. The scheme will launch in autumn 2015

You’ll be able to open an online account, which you can pay into to cover the cost of childcare with a registered provider. This will be done through the government website, GOV.UK.

2. For every 80p you or someone else pays in, the government will top up an extra 20p

This is equivalent of the tax most people pay – 20% – which gives the scheme its name, ‘tax-free’. The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year.

3. The scheme will be available for children up to the age of 12

It will also be available for children with disabilities up to the age of 17, as their childcare costs can stay high throughout their teenage years.

4.To qualify, parents will have to be in work, earning just over an average of £50 a week and not more than £150,000 per year

The scheme is designed to be flexible for parents if, for example, they want to get back to work after the birth of a child or work part-time.

5.Any eligible working family can use the Tax-Free Childcare scheme – it doesn’t rely on employers offering it

Tax-Free Childcare doesn’t rely on employers offering the scheme, unlike the current scheme Employer-Supported Childcare. Any working family can use the Tax-Free Childcare scheme, provided they meet the scheme’s eligibility requirements.

6. The scheme will also be available for parents who are self-employed

Self-employed parents will be able to get support with childcare costs in Tax-Free Childcare, unlike the current scheme (Employer-Supported Childcare) which is not available to self-employed parents. To support newly self-employed parents, the government is introducing a ‘start-up’ period. During this, self-employed parents won’t have to earn the minimum income level, £50 a week.

The scheme will also be available to parents on paid sick leave and paid and unpaid statutory maternity, paternity and adoption leave.

7. If you currently receive Employer-Supported Childcare then you can continue to do so

You do not have to switch to Tax-Free Childcare if you do not wish to. Employer-Supported Childcare will continue to run. Parents won’t be able to register for Employer-Supported Childcare after Tax-Free Childcare is introduced in autumn 2015, but those already registered by this date will be able to continue using it for as long as their employer offers it. However, Tax-Free Childcare will be open to more than twice as many parents as Employer-Supported Childcare.

Employers’ workplace nurseries won’t be affected by the introduction of Tax-Free Childcare.

8. Parents and others can pay money into their childcare account as and when they like

This gives you the flexibility to pay in more in some months, and less at other times. This means you can build up a balance in your account to use at times when you need more childcare than usual, for example, over the summer holidays.

It’s also not just the parents who can pay into the account – if grandparents, other family members or employers want to pay in, then they can.

9. The process will be as simple as possible for parents

The process will be light-touch and as easy as possible for you. For example, parents won’t have to report any change of circumstances to HMRC; there will be a single log-in service where parents can view accounts for all of their children at once.

10. You’ll be able to withdraw money from the account if you want to

If your circumstances change or you no longer want to pay into the account, then you’ll be able to withdraw the money you have built up. If you do, the government will withdraw its corresponding contribution.

More information will become available ahead of the scheme being introduced so parents making childcare decisions are able to consider all their options.

HM Treasury’s infographic explains how the scheme will run.

Last year we asked parents for their views on how this scheme should be designed. If you’re interested in how we formed the policy after this feedback, then you can read more on what we’re doing to make Tax-Free Childcare simple, flexible and fair.

You can also access the full consultation response document online.


From:HM Treasury, Department for Education, HM Revenue & Customs and Prime Minister’s Office, 10 Downing StreetHistory:Updated 24 March 2014, see all updates

Updated to reflect that Tax-Free Childcare will also be available for children with disabilities up to the age of 17.
24 March 2014 11:55am
First published.
18 March 2014 12:15am

Part of:Creating a simpler, fairer tax system, Improving the quality and range of education and childcare from birth to 5 years, Children and young people, Tax and revenue and UK economy others



GOV.UK Tax Free Childcare Announcement

Hello Employer,
HMRC Business Help and Education Emails
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From: Sarah Phillipson


The Government has today outlined how the new Tax-Free Childcare scheme will work, following last year’s consultation. This email contains information on what the scheme will mean for parents and employers. We have included a  draft email to send to your employees below.

If you currently offer childcare vouchers or directly-contracted childcare to your employees through an Employer-Supported Childcare scheme, you will be able to continue offering the scheme for existing members for as long as you want. Parents   will not be able to join your scheme – or move employers within the scheme –   once Tax-Free Childcare is introduced in autumn 2015.

Tax-Free Childcare is designed to benefit employees directly, helping working parents with their childcare costs, supporting them back into the workplace if they want to and  helping them to increase their hours in work. Key features of the new scheme, which will be introduced in autumn 2015 include:

  • Help with childcare costs for a much wider range of working parents – available to around 1.9million families.
  • Providing all eligible parents with a government  top-up of 20p for every 80p parents pay towards their childcare costs, up to a limit of £2,000 per child per year.
  • Unlike initial proposals, the scheme will now be rolled out to all eligible families with children aged under 12 within the first year of the scheme’s operation (rather than staggered over seven years).
  • With a single account provider – National Savings and Investments – the process will be simple for parents, and their money will be safe.
  • Run through flexible online childcare accounts which will allow parents to build up credit for use when they need it most, for example during school holidays.
  • Parents who are currently using the Employer-Supported Childcare scheme will be able to choose to stay in that scheme or move to Tax-Free Childcare. It will be their choice. Employers’ workplace nurseries will not be affected.

You can play a role in Tax-Free Childcare if you want to. You and your employees can familiarise   yourselves with the key benefits of the scheme by visiting GOV.UK. The Government will provide further  guidance in due course.

You may wish to send the following information to your employees:

For parents whose employer offers Employer-Supported Childcare  

The Government is introducing Tax-Free Childcare, to help parents go out to work if they want to so they can provide greater security for their family. This will be available to all eligible employees from autumn 2015. However, it is important to note that you will not lose your ESC entitlement. You will be able to choose whether you continue receiving Employer-Supported Childcare or move to Tax-Free Childcare, although a household cannot be in receipt of support through both schemes at the same time.

The Government will provide clear advice and guidance to allow you to decide which support best suits your individual circumstances.

You can carry on in the current scheme for as long as your employer continues to offer the scheme. If you move employers after autumn 2015 you will no longer be entitled for Employer-Supported Childcare – although you will be able to join the new scheme if you meet the eligibility requirements.

Workplace nurseries will not be affected by the introduction of Tax-Free Childcare.

For parents whose employer does not offer Employer-Supported Childcare 

The Government is introducing Tax-Free childcare, to help parents go out to work if they want to so they can provide greater security for their family. This will be available to all eligible employees from autumn 2015. You can register for the scheme direct with Government, open a childcare account, and receive 20 per cent support towards qualifying childcare costs, up to a limit of £2,000 Government support per child per year.

Tax-Free Childcare will be introduced in autumn 2015. The scheme will be rolled out to parents with children under 12 within the first year of the scheme’s introduction. The Government will set out further details of the scheme’s rollout in due course, in good time for you to factor in to your childcare plans. Further advice is available at GOV.UK