Are you tax ready for the new childcare scheme?
A new scheme to help families meet the costs of childcare, Tax-Free Childcare, is due to launch in early 2017.
It is designed to eventually replace the Employer Supported Childcare Scheme and offers to pay working families 20% of their childcare costs.
The government has issued a top ten list of things that you should know about the new scheme;
- An online account will be available for families to pay into to cover the cost of childcare with a registered provider.
- Payments into the account can be made flexibly and can come from other stakeholders such as grandparents.
- Money can be withdrawn from the account if people’s circumstances change.
- The government will top up the account with 20% childcare costs up to a total of £10,000.
- Tax-Free Childcare will be available for children up to 12 years old and for disabled children up to 17 years old.
- Parents must be in work and each earning £115 per week and a maximum of £100, 000 per year.
- Any eligible working family can use the scheme regardless of employer.
- The scheme covers the self-employed plus parents who are on paid sick leave, maternity, paternity and adoption leave.
- If you receive Employer Supported Childcare then you don’t have to switch.
- The scheme is designed to be as simple as possible to operate.
Although the scheme is open to more parents than Employer-Supported Childcare, there are circumstances where the current scheme is advantageous, according to the Money Saving Expert website. These include;
- Couples where one parent doesn’t work and the employed parent is eligible for childcare vouchers.
- Basic rate taxpayer parents with childcare costs of less than £9,936.
- Higher rate taxpayers with childcare costs under £6,252.
Understanding the best approach to take when planning for your children’s future while ensuring you pay no more tax than you are required is hard. That’s why Lewis Smith & Co. offers a comprehensive tax planning service to sort out the complexity.
Lewis Smith & Co. – Accountancy for Kingswinford businesses