If you’re a parent trying to cover the cost of childcare, you may be pleased to hear that Childcare Vouchers will remain available to new applicants for an additional six months.
The new cut-off date for applications is October 2018 – pushed back from April 6th – meaning you have a bit longer to benefit from the tax and national insurance relief offered via Childcare Vouchers if you haven’t applied already.
Of course, this does not affect the provision of the Tax-Free Childcare (TFC) scheme, which has come into effect as a replacement for Childcare Vouchers.
So what does this mean for parents in real terms?
“Although TFC will eventually replace the tax and national insurance relief associated with Childcare Vouchers, the rules for the TFC scheme are different,” Anne Fairpo, chair of Low Incomes Tax Reform Group, explained. “While some people will be better off under the TFC scheme others will benefit more from Childcare Vouchers.”
To help you work out whether you’ll benefit more or less under TFC, we’ve summed up some of the differences below:-
|Both parents can claim if both are working and meet the below criteria||The scheme pays out per child, not per person|
|Both parents can claim if they are separated or divorced||Only one household can claim for each child, meaning both parents can’t claim if they are separated or divorced|
|You can save up to £933 per parent a year (£1,866 per family – based on a basic rate tax payer)||You can save 20% on childcare costs of up to £10,000 per child or £20,000 for disabled children|
|You can claim for children up until the age of 15||You can claim for children up to the age of 12. This is extended to 17 if the child is disabled|
|To be eligible, you must earn above national minimum wage once Childcare Vouchers are deducted||To be eligible, parents must earn above an average of £120 a week|
|No upper limit on salary to qualify||You must earn below £100,000 a year to qualify|
|You aren’t eligible if you’re self-employed||You can claim TCF if you’re self-employed|
|Childcare Vouchers are run via payroll||Both parents must be working at least 16 hours per week to claim TFC|
|Childcare providers can accept payment via the scheme if they are registered with Ofsted or an equivalent governing body||Parents must use the government website to confirm they are eligible to claim TCF each quarter|
|You can claim both Childcare Vouchers and Child Tax Credit||Childcare providers can accept payment via the scheme if they are registered with Ofsted or an equivalent governing body|
|You have to opt out of Child Tax Credits to claim TCF|
You can find a free childcare savings calculator here.
If Childcare Vouchers allow you to save more and you’re not yet signed up, you have until October this year to do so.
If TCF is the best option for you, you can claim now if your child is under 6 years of age. If your child is over 6 but under 12 (under 17 for disabled children), you’ll be able to apply for TCF from April this year.