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The change from Childcare Vouchers to Tax Free Childcare, and what it means for you

Childcare Vouchers is a scheme where your employer provides childcare vouchers. For new applicants, it’s being replaced by Tax Free Childcare (although this has been delayed from April to October 2018 due to pressure from the Labour party). Tax Free Childcare is where parents put money into a special account for each child which is then topped up by the Government and paid directly to the childcare provider. The schemes offer different levels of support.

Childcare Vouchers will close to new applicants, from 4th October 2018. People already on this scheme will be allowed to continue, but people won’t be allowed to re-join.

After this point, all new entrants to the Childcare system will receive this bit of their childcare support as Tax Free Childcare. It’s worth nothing that Tax- Free Childcare or Childcare Vouchers are on top of any Free Childcare entitlement you have (for example, the 30 hours free childcare provided to some by the Government).

What does this mean for me?

If you’re eligible for both or for only Childcare Vouchers, you could lose a lot of money if Childcare Vouchers is the better option for you and you’re not on it by October 2018.

What am I eligible for? 

If you fulfil the conditions for either scheme, you’re eligible that scheme –

Childcare Vouchers Tax Free Childcare
Who can apply Only those whose employer offers it. This doesn’t include the self-employed. Anyone
Minimum earnings None. One parent needs to work. £120/week –  and if you’re a couple, both of you must be earning.
Child’s maximum age 15 (16 if disabled) 11 (16 if disabled)
Maximum income None Less than £100,000 per parent

 

If I’m eligible for both, what’s better for me? 

This depends on your specific circumstances.

According to Money Saving Expert, if you’re spending less than £6,252 a year on Childcare (or £9,252 if you’re a basic rate Taxpayer household) Childcare Vouchers will always be better.

Above these levels, it depends on how much you are earning and how much you are spending on childcare. You can find out more here.

Note that Tax-Free Childcare cannot be used at the same time as Universal Credit, Childcare Vouchers or Tax-Credits (including both Child Tax Credit and Working Tax Credit). This is different to the Childcare Voucher scheme, and means that Childcare Vouchers might be better for some families who are eligible for both.

 

 

Where can I read more information about this?

Money Saving Expert has a great breakdown of this information – https://www.moneysavingexpert.com/family/Tax-Free-Childcare

The government information on Childcare Vouchers is here https://www.gov.uk/help-with-childcare-costs/childcare-vouchers, and that for Tax Free Childcare is here – https://www.gov.uk/help-with-childcare-costs/tax-free-childcare

 

 

 

 

 

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