Tax Free Childcare Scheme – Budget 20 March 2013

A new tax free childcare scheme will be introduced to support working families

with the costs of childcare. Once fully in place, support will be worth 20 per cent

of childcare costs up to £6,000 per child each year for children under 12. In real

terms this is a saving of up to £1,200 for each child.

This new system will be phased in from autumn 2015, with all children under five

eligible from the first year of operation. Disabled children up to age 16 will also

be eligible in line with existing employer supported childcare rules.

Tax free childcare will be available to families where all parents are working, who

are not already receiving support through tax credits or Universal Credit and

where neither parent earns over £150,000 a year. Alongside the new scheme,

the current employer supported childcare will be phased out for new applicants

from autumn 2015.

The childcare support within Universal Credit will also increase, to improve

work incentives and ensure that it is worthwhile to work up to full-time hours

for low and middle income parents. An additional £200 million of support for

childcare will be provided, which is equivalent to covering 85% of childcare costs

for households qualifying for the Universal Credit childcare element where the

lone parent or both earners in a couple pay income tax. The details of how to

provide this support will be determined as part of the consultation on the tax

free childcare scheme, to ensure the two schemes operate effectively together.

Back to Main Page – Budget 20 March 2013

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