For many families, childcare vouchers will save them more money than Tax-Free Childcare (TFC). Help your parents understand what’s best for them.
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How childcare vouchers work today
Childcare vouchers are a Government-approved, tax-efficient way of paying for childcare. By joining their employer’s scheme parents can exchange up to £243* a month for childcare vouchers, which they can use to pay for registered childcare.
*Please take a look at ‘The nitty gritty’ below to get into the detail.Close
The Government has introduced a new scheme called Tax-Free Childcare (TFC). TFC is different to childcare vouchers, and will not be offered through employers.
TFC works a bit like a savings account - parents will need a separate account for each of their children. They pay money into the account from their net pay, so it’s taken after tax and National Insurance have been deducted. Then for every 80p parents pay in, the Government adds 20p. Parents will need to pay in £8,000 to reach the maximum Government contribution of £2,000 per child per year.
TFC has now launched. So far, it's only being offered to parents of children who were under 4 years of age on 31 August 2017. Parents of older children will be able to use TFC soon.
From April 2018 parents will lose the right to sign up to a childcare voucher scheme through your employer. However, anyone already taking childcare vouchers can continue taking them for as long as you remain eligible.
Some parents will be better off with the existing childcare voucher scheme. Parents can use our interactive decision tree to help them make an informed decision about what’s best for them.Close
TFC in a nutshell
Here’s what we know so far:
- Parents can only use it for children under the age of 12, or 17 for children with disabilities
- Parents will need to set up a separate TFC account for each child they use registered childcare for
- Parents can only use TFC if both parents are in work, unless they are a lone working parent
- Parents can only use TFC if both parents meet the minimum income level i.e. they must reasonably expect to earn the equivalent of 16 hours National Living Wage/National Minimum Wage a week for the next 13 weeks
- Parents can’t use TFC if they or their partner (if they have one) earn more than £100,000 a year
- Parents can use TFC if they’re self-employed
- Parents can’t use TFC if they receive tax credits or the childcare element of Universal Credit
- TFC can only be used to pay for childcare during the hours they are at work
- Parents who work outside the UK for longer than 6 months can’t register for TFC
If you receive payment via childcare vouchers today, nothing will change
We’re committed to managing our childcare voucher schemes for as long as employers choose to offer it to their staff.
Parents can sign up to our scheme until April 2018, at which point they lose the right to join it. It’s likely that you’ll start to receive payments from parents in the TFC scheme from 2017 too, although we don’t know how that will work at the moment.Close
- Help your parents understand their options
The nitty gritty
*Figures quoted are the maximum available savings for a Basic rate taxpayer. Higher and Additional rate taxpayers may save around £623 a year. Savings will depend on each parent’s circumstances.Close