Tax Free Childcare: The Facts

Tax Free Childcare is the government’s latest program to help financially support parents returning to work after having a child.

Our HR Officer, Isobel has all you need to know about this new scheme.

By Isobel Hallam

Any working parent will recollect the challenge of going back to work after having children. Trying to make it into the office without getting snot on your shoulder or sticky porridge handprints on your skirt. Remembering what it’s like to be amongst adults again, figuring out how to do the job you could previously do with your eyes shut, whilst getting very little sleep and being racked with guilt for leaving the kids at nursery! AND once you’ve managed to figure out who is looking after the kids whilst you’re at work, and how everyone is going to get to where they need to be on time, the next challenge is paying for it! Having just returned to work myself after having my second child, I know these challenges all too well!

With childcare costs ever rising, the government has introduced a number of initiatives over the last few years designed to reduce the financial pressures and help parents return to work. The most recent introduction has the very impressive name, ‘Tax Free Childcare’ – whether the scheme itself is impressive or not remains to be seen.

So what is it?

For every £8 a parent pays into their childcare account, the government will pay in an extra £2, up to a maximum of £2,000 per child per year. But (as you’d expect!) there are some catches. The childcare provider must be signed up to Tax Free Childcare, and the parent (and partner) must earn at least £120 per week but less than £100,000 a year each. Oh, and you can’t get it if you already receive support with your childcare, such as childcare vouchers or salary sacrifice schemes. The full eligibility criteria can be found here.

Many employers already offer childcare voucher schemes, but these will be closing to new applicants from April 2018, although employees who have already signed up to the vouchers can continue to receive them. In effect, Tax Free Childcare will be replacing childcare vouchers, but they work in a slightly different way and some parents will find they are better off using one service whilst others will be better off using the other.

What do I need to do?

There is a real concern that parents do not know about the new scheme and that the old scheme will be closing for new applicants, so talking to your employees and letting them know what’s what, would be a good place to start. It doesn’t cost you anything, and could significantly help them out financially – bonus engagement points for you! Why don’t you hold a lunchtime drop in session, or add it onto your next team meeting agenda? At the very least send an email with a few key details and links, reminding employees to look into it before it’s too late to choose between the two.

If an employee is unsure which scheme will benefit them, there are online calculators like this one, which can help them make a decision, so this is probably their best starting point.

Now this might not help with the other challenges of getting back to work with kids, but it could help tick one job off the never-ending list!

If you’d like any more information on this, just get in touch with the HR180 team on 0113 287 8150.