UK parents have long lamented the fact that childcare in this country is excessively expensive, and the reality is it is among the highest in the world. The good news is there are many different ways you can help reduce the costs, not least the new government Tax-Free Childcare scheme. The bad news is, it all seems far too complicated, and nobody really knows what they’re entitled to, or how to get it.
For the time being this scheme will run in conjunction with the established Childcare Vouchers scheme. However, it will eventually replace this. What that means is for the time being, you have the option of the two. But which one is the right one for you?
The reality is there is no easy answer, as what you’re entitled to will depend on how many children you have, the amount of tax you currently pay and the costs of your associated childcare fees.
Who can claim?
With the tax-free childcare scheme parents will need to work 16 hours or more (employed, or self-employed), and earn at least £115 per week.
This means it can be a great option for those who are self-employed, as the Childcare Vouchers are only offered if an employer chooses to.
Are there minimum earning?
With the tax-free childcare scheme you will need to earn a minimum of £115 per week (and no more than £100,000 per annum). If you are a couple, then both parents will need to be working (though a combined annual income can exceed £100,000).
With childcare vouchers there is no minimum earnings stipulation, and only one parent needs to be in work. Equally, there is no maximum earnings limit.
Maximum age of children
Parents can claim for children up to the age of 12 (or 17 for children with disabilities) when it comes to the tax-free option, whilst with childcare vouchers it’s a maximum age of 15 (or 16 if a child is disabled).
What if you are eligible for both?
It appears that the more children you have, the better off you would be under the Tax-Free scheme. You can claim up to £2,000 per child, which means if you had four children, you would be able to claim £8,000 per annum.
Although you can get up to 20% off childcare costs with the Tax-Free scheme, depending on your vouchers, you could be able to get 32% and 47% off through your employer. This means if you have one or two children, you may well be better off with the Childcare Voucher scheme instead.
One of the best ways to find out which is the better option for you is to have a look at the Money Saving Expert website, or speak to your employer/HR department.