Tax-Free Childcare set to benefit contractors in 2017

Tax-Free Childcare set to benefit contractors in 2017

4 April 2016

The Chancellor’s budget statement was more than a fortnight ago, but the consequences of announcements for everyday taxpayers are still emerging. Among the partially buried announcements is this good news for contractors, who may have been unable to take advantage of previous childcare schemes.

The eagerly awaited Tax-Free Childcare (TFC) scheme was delayed following a legal challenge in 2015, but the new scheme will now come into force in ‘early 2017.’

All ‘employees’ will be able to take advantage of this scheme, even if they couldn’t access the previous Childcare Voucher schemes.

The government announced that the new scheme will be rolled out gradually, starting with families with younger children and then eventually being extended to all eligible families with children under 12 by the end of 2017.

TFC allows qualifying parents to pay into a special account for childcare costs, to which the government will contribute 20 per cent. The maximum amount a family can receive from the government is £2,000 per child per year.

The scheme differs to previous ‘employer-supported childcare’ schemes, because you do not have to have a participating employer in order to access government funding.

Some agencies and employers do not offer contractors the opportunity to take part in these voucher schemes. Previously excluded contractors will benefit enormously from the new scheme, which is far more wide-ranging and inclusive.

Employer-supported childcare schemes, often referred to as Childcare Voucher schemes will still remain open to new entrants until April 2018. Parents who qualify for both schemes will be able to choose based on their own individual set of circumstances. 

However, some interest groups have raised concerns that the broad array of options could be confusing. The Low Incomes Tax Reform Group (LITRG) is encouraging the government to publish more detailed guidelines to help parents decide what is best.

LITRG Chairman, Anthony Thomas, said: “Since the scheme was first announced, LITRG have raised many concerns about the interaction between TFC and other childcare schemes. People will face extremely complex and difficult financial decisions about whether to join the new TFC scheme or stay in existing schemes including childcare vouchers, tax credits and universal credit.

“It is crucial that the Government ensure that detailed guidance is published over the next few months ahead of the commencement of the scheme and that potential users are given support to help them make the right choice. For the most complex situations, a telephone advice line should be provided with trained advisers who can guide people through the interactions. Funding should also be made available for the voluntary sector to support people with these difficult choices.”

Miles Grady, Director of said: “This isn’t a new announcement, but for contractors who have not previously been able to take advantage of the Childcare Voucher schemes, it will bring huge benefits. These contractors will be able to claim up to £2,000 if they have one qualifying child and up to £4,000 if they have two children. This money will help contractors really get on at work knowing that their children are receiving the best care.”

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