The Treasury have published Tax-Free Childcare: consultation on design and operation which will be phased in from autumn 2015 replacing over time the existing system of Employer Supported Childcare. The consultation also covers details of the planned increase in childcare support within Universal Credit, available from April 2016, as childcare support moves from tax credits into Universal Credit. Consultation closes on 14 October 2013.
The new Tax Free Childcare scheme will support working families with 20% of their childcare costs up to a limit of £1,200 per child each year. In the first year, all children under 5 will be eligible, with the child age limit eventually including all children under 12. It will only be available to families where both parents work, or for a single parent who works. Earnings must be less than £150,000 for each parent per year. The scheme will, for the first time, be available to the self-employed. It will not be available to families that receive support through tax credits or Universal Credit (which will be introduced in the next two years to replace tax credits), as instead parents can get up to 70% of childcare costs paid by the government. From April 2016 this will increase to 85% but only for households where all parents pay income tax.
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