In 2013 the government announced a new tax break for working parents to help them pay for childcare. It will at last, be available soon. But what is it worth and how can you take advantage of it?

Childcare tax break

It’s so long since the government announced the introduction of ‘’Tax-Free Childcare’’ that you’ve probably forgotten about it. In the meantime, it’s faced a number of technical troubles resulting in amendments to the original proposal and a legal challenge to the whole scheme. However, it’s on the verge of becoming reality, so here’s a summary of the revised main terms and conditions:

  • Tax-Free Childcare is an online account, like a bank account which you can pay money into. The account can only be opened by parents with children up to twelve or 17 if they have disabilities.
  • The parents must be in work, and each earn at least £115 a week. But not more than £100,000 each per year.
  • Anyone can pay into it, not just the parents, at any time they like.
  • For each 80p paid in the governments will add 20p.
  • The money must be used to pay for childcare with a carer who is registered to receive a Tax-Free Childcare payment.
  • To qualify you must not receive free or subsidised childcare, or childcare vouchers from your employer.
  • If you close the account and draw the money out instead of using it for childcare, you’ll lose the government contribution.

When can you sign up? 

There’s good news and bad. While some parents will be able to start a Tax-Free Childcare account some time in spring 2017 (an exact date hasn’t been fixed), the scheme is being rolled out gradually. It’s being made available to those with the youngest children first. It might be much later in the year before it’s available to all working parents.

Tip. Register with the GOV.UK portal to receive an e-mail alerting you to when you become entitled to start an account.

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