Tax-free childcare

The rules are changing…

Those of you with children will fully appreciate how expensive childcare can be, especially when they are younger.

The good news is that you can get help paying for childcare if it’s provided by a registered childminder, play scheme, nursery, registered school etc.  Often referred to as ‘approved childcare’.

The government has recently changed the rules and you might be interested in the new options now available:

1.  Childcare Vouchers

You may already be familiar with Childcare Vouchers, whereby an employer (i.e. your limited company) can purchase vouchers to be used as payment to registered childcare providers.

The cost is classed as a legitimate business expenses, thereby reducing your Corporation Tax bill and the vouchers are paid to the parent before tax and NI deductions, making them an attractive salary option.

This scheme has been around for years but is being phased out.  You can join a scheme up until April 2018 but after that date this option will cease.

2.  Tax-Free Childcare (TFC)

Instead the government has introduced Tax-Free Childcare, which will eventually take the place of Childcare Vouchers.

As a parent, you open an online account to pay for registered childcare.  For every £8 you pay in the government will top up your an account with an extra £2.  You can receive up to £2,000 per child or £4,000 if you have a disabled child.

For the first time, this is an incentive open to the Self-Employed, which has made it very popular.

There were teething problems with TFC when launched in April 2017 but we’ve read that the system is now running as expected.

To find out more information on these schemes and to use a simple online calculator to work out how much you could save visit https://www.childcarechoices.gov.uk/

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