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Tax-Free Childcare is a new scheme that began rolling out on 21 April 2017 and will offer working families 20% support towards qualifying childcare costs up to certain limits.

This new scheme will eventually replace the directly contracted childcare and childcare vouchers provided by employers under the Employer Supported Childcare Scheme. However, parents already receiving childcare vouchers will be able to continue to use them after October if their current employer continues to offer the voucher scheme, but no newcomers will be accepted.
A major difference between the two schemes is whereas childcare vouchers have been processed through payroll, the new system will be administered by parents themselves through an online account which can be accessed via HMRC’s website.

You may be eligible for this scheme if both you and your partner are in work and earning over £120 per week. If either of you earn over £100,000 per annum you will not be eligible. Tax Free Childcare offers up to £2,000 a year per child (the government will pay £2 for every £8 you pay in up to the £2,000 limit) to help with the costs of childcare. The money can go towards a whole range of regulated childcare, whether nurseries, child minders, after-school clubs or holiday clubs. You can find out more on the Childcare Choices website.

If you would like to discuss the tax implications of the new childcare scheme, please get in touch with the team.