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.
When Tax-Free Childcare (TFC) first launched in early 2017 it was only offered to parents of children who were under 4 years of age on 31 August 2017 (or who had their 4th birthday on that day). HMRC rolled out TFC to children under 6 on 24 November, children under 9 on 15 January, and children under 12 years old on 14 February 2018.
Government has also promised to make further improvements to the online application system, which has seen some issues. This means almost all parents should receive a response within five working days, and most get their decision instantly.
From October 2018 parents will lose the right to sign up to a childcare voucher scheme through their employer. However, anyone already registered for childcare vouchers – and has received one in the last rolling 12-month period - can continue taking them for as long as they 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.
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