All You Need To Know About the 30 Hours ‘Free’ Childcare Funding, Childcare Tax Credits, Tax-Free Childcare, Childcare Vouchers and You.

In last week’s budget the Chancellor, Phillip Hammond, confirmed two major childcare changes which directly affect parents and families – the increase to 30hrs free nursery provision for 3 & 4 year olds, and the new Tax-Free Childcare scheme (this is especially good if you’re self-employed).

Below are some facts to show you who is eligible, and what steps you should take to access these and use them for places at registered nurseries, childminders, after-school clubs etc. I’ve broken it down into easily understood sections – but will also include some links to the appropriate government sites for you to go to for more information.

— The New 30hrs ‘Free’ Childcare For 3 & 4 Year Olds —

From September 2017 the 15hrs’ free state nursery provision that you, as a parent, get 38 weeks a year, will now rise to 30hrs. This is provided that:

  1. You work more than 16hrs a week (both people in a couple must work)
  2. No one parent earns more than £100,000 per year.

I say ‘free’ – there is huge concern for childcare providers that the amount of funding per child that they will receive from the government is unrealistic and will leave them out of pocket. This means that many providers are reluctant to offer funded places. For parents this means that there may not be enough funded places for everyone and parents who do secure places for their children may be asked to subsidise for extra’s such as nappies, food etc.. See my blog ‘30 Hour Funding Offer Feature’. 

— Are you eligible for Childcare Tax Credits, typically worth £3,000 per year? —

You could be entitled to these Childcare tax credits – NOT the same as child tax credits:

  1. If you pay for childcare
  2. If you work more than 16hours a week (couples must both work)
  3. If you have less than £46,000 per year family income.

Childcare Vouchers —

These pay for childcare from pre-tax income, but you need to sign up soon.

Anyone with children whose employer offers Childcare Vouchers can get them. Here you usually swap pre-tax salary for vouchers. There is more information of this on the GOV.UK site.

For example – a basic-rate taxpayer can swap £1,000 of salary, (which is only around £700 in take-home pay) for £1,000 in Childcare Vouchers, so you save £300. To get these you must sign up by April 2018.

The new ‘Tax-Free Childcare’

  1. This can mean up to £2,000 per year free per child.
  2. It starts next month for the youngest children, and will be rolled out over the year for the rest.
  3. For every 80p you put in an NS&I Tax-Free Childcare account, (up to £8,000 per year) the state adds 20p (so up to £2,000 a year free per child). To be eligible,
  4. You must work more than 16 hours a week (couples both must work)
  5. No one parent can earn over £100,000.

Which of these is better for you? —

Childcare Vouchers or Tax-Free Childcare – you can’t have both. But which one should you choose if you’re eligible for both?

* If you have more children and greater childcare costs ‘Tax Free Childcare’ is best for you.

* If you have fewer children and lower childcare costs ‘vouchers’ will suit you best.

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