In 2013 Budget, the Government announced a new childcare scheme called Tax-Free Childcare to provide further support for working families who do not receive Universal Credit. Tax-Free Childcare will offer working families, where neither parent is an additional rate tax payer, 20% support towards qualifying childcare costs – the equivalent of basic tax relief.
Childcare support is offered to parents on Universal Credit as part of a welfare system designed to make sure that work pays for those who need the most support. Childcare costs are taken into account in calculating working parents’ Universal Credit awards, and it is therefore right that a parent in receipt of Universal Credit cannot receive support under this scheme at the same time. The new Tax-Free Childcare scheme will support families as they increase their income and, for the first time, families can be sure that support for childcare costs will be available as they move off benefits altogether.
Whilst parents can only receive support from one scheme at any time, where families are eligible for both they will have the freedom to choose the scheme which best meets their needs and will be able to move freely between schemes when they experience a relevant change in circumstances. Draft guidance for parents on Tax-Free Childcare has already been published online for consultation.