The cost of living has made it more and more difficult for families to survive on a single income, and yet where both parents are working, the high price of childcare swallows a large chunk of income. As of autumn 2015, the government is introducing a new Tax-Free Childcare scheme aimed at providing greater security for many more families in the UK. So how could it help you?
How does it work?
Come this autumn, parents will be able to open an online account, which they will pay money into to cover the cost of childcare. However much you pay in, the government will top it up with an extra 20 per cent - the equivalent of the income tax most of us pay. Therefore, for every 80p you pay in, the government will add 20p to the account. The scheme has been designed to be as simple as possible, with a single log-in where you can view accounts for all of your children at once, and no need to report any change to HMRC.
Who is eligible?
If you are working and earning over an average of £50 a week (and not more than £150,000 per year), and have a child up to the age of 12, you will be qualify for the scheme. If you have a child with disabilities, the scheme will run until they reach the age of 17. Unlike the current scheme, Employer-Supported Childcare, the new system will be open to self-employed parents too, and those that are newly self-employed will also receive support, thanks to a 'start-up' period where you won't need to be earning the minimum income level of £50 a week. Parents on paid sick leave, maternity, paternity or adoption leave will also qualify.
Those already registered for the Employer-Supported Childcare scheme will be free to continue to use it, or switch to the Tax-Free Childcare alternative when it launches.
How will it benefit me?
The key benefit of the new scheme is its flexibility. Since the amount you need to be earning to qualify is fairly low, it offers parents support when they go back to work after the birth of a child, even if it's only part-time. Furthermore, you can pay in more some months and less others, depending on your circumstances. This way, you can build up a balance in the account for those times when you need extra help, such as during the school holidays. And it's not only parents that can pay in - grandparents, other family members and employers are free to pay in should they wish to.
Just as you will be free to build up a balance in the account, you will also be able to withdraw money should your circumstances change. The government will simply withdraw the corresponding 20 per cent of the cash you take out.
The government estimates that nearly 2 million families will benefit from the new scheme - more than twice as many as could take advantage of the existing Employer-Supported Childcare - and a working family with two children under 12 could save as much as £4,000 a year. For more information, visit the gov.uk website.
What do you think? Will this new scheme make your life easier? Leave your comments below...