Out of School Alliance - Help and Support for Out of School Clubs

Tax-free childcare proposals

Note: This article was written in 2013 when the scheme was first announced. Since then a few of the details have been changed, and then in July 2015, the start date was pushed back to 2017.

 

At the end of March 2013 the government announced their proposed new tax-free childcare scheme which is due to come into effect in 2015. Under the new scheme parents will receive 20% of their yearly childcare costs up to a maximum of £1,200 per child. In order to be eligible for the tax 'rebate' both parents will need to be working and not in receipt of tax credits or Universal Credit (when it is introduced).

Benefits of the new scheme

This is an improvement on the current employer supported childcare voucher scheme in that:

  • it will be available to everyone who uses Ofsted-registered childcare, and not restricted those few who work for a company that offers childcare vouchers
  • it will be available to self-employed people
  • the rebate is worth up to £1,200 per child, so if a parent has two or more children they should receive more than currently

Drawbacks of the new scheme

The new scheme also has some downsides:

  • it is not open to families where only one parent works (unless they are a lone parent)
  • the limit is £1,200 per child, not per working parent, so if currently both parents claim the maximum in childcare vouchers and have one child, they will be slightly worse off under the new system

Major drawback for out of school clubs

However for out of school clubs, the biggest drawback is that the existing employer supported childcare voucher scheme will be closed to new entrants in 2015, but the new tax-free childcare scheme will initially only be open to children under 5, with access to older children being rolled out over time. 

Eligibility for the scheme will increase by one year each year until all children under 12 are eligible, which is likely to be in 2022. This means that parents of children who are over 5 at the start of the tax-free childcare scheme will never be able to access it, but won't be able to join any of the existing employer-suported childcare voucher schemes either. They will therefore miss out on subsidised childcare - unless they are already part of an existing childcare voucher scheme.

As many parents currently rely on childcare vouchers to help them pay for out of school care, we should be reminding parents that if they might want to make use of childcare vouchers in the future, they should think about getting their employer to sign up for the childcare voucher scheme now before the schemes are closed to new entrants.

Who will pay for the scheme?

One final but very important point: It is currently envisaged that the new tax-free childcare scheme will be run by a voucher provider, with parents paying in 80p and the government topping this up by 20p up to the maximum for each child. Parents will then use the vouchers to pay for childcare. What is unclear at the moment is who will be paying the voucher company to provide this service? The government is unwilling to take on any additional costs and has stated that it doesn't want parents to be charged, which does rather leave the impression that the government will be expecting childcare providers to pay for the privilege of accepting the vouchers. If you are unhappy with this possibility, make sure that you respond to the consultation on the proposed scheme.

Give your feedback

The consultation on tax-free childcare was launched on 4 August 2013 and closes on 14 October 2013. However if you want to use the online questionnaire for childcare providers you only have until 7 October to respond.
Send in your feedback now

More information

Read the government announcement in full
Find out how to participate in the consultation process