£1200 childcare tax boost for hardworking families




Last month, I wrote a blog about how more needed to be done to cut childcare costs for hardworking families. Today, the Government has announced  a welcome step in the right direction.

I feel passionately that the system should reward those who work, whether that be through benefits or tax breaks. That is why I rebelled on the 1% cap on benefit rises.

 

The  announcement means that, for every pound a family spends on childcare, they get 20p of government money, up to the annual limit on costs for each child of £1,200.

The scheme is  is expected to benefit 2.5 million families, significantly more than the current employer-supported childcare voucher scheme, which is provided by only around five per cent of employers.

The details of the new scheme will be consulted on soon. before being introduced in 2015.

 

Here is a briefing I received today on the announcement.

 

What is being announced?

From Autumn 2015, the government will meet 20% of childcare costs for working families - building up to £1200 per child under 12, per year, once the scheme has been fully implemented. So, for example, a working family with two children would receive up to £2400 every year in support.

 

How will it work?

Families will be able to open an online voucher account and have their payments ‘topped up’ by Government. For every 80p they pay in the Government will put in 20p up to an annual limit per child – so the equivalent of the basic rate of income tax.

 

Will I qualify for this scheme?

To qualify all parents must be working, not receiving tax credits or Universal Credit, and neither can earn over £150,000.

The existing voucher scheme, Employer Supported Childcare (ESC), will continue for current claimants if they want to stay in it but will be replaced by the new scheme when it’s phased in.

How much is the Government investing?

The Government will put £1billion into the childcare system. This includes £200 million in childcare support for those on Universal Credit.

What’s next?

We will consult with parents, childcare providers, the childcare voucher industry and employers on how best to deliver support to parents through the voucher system. We aim to phase in the vouchers from Autumn 2015.

How will this differ from the existing voucher scheme?

The existing voucher scheme, Employer Supported Childcare (ESC) is only available to around 500,000 families that work for the less than 5% of businesses that choose to offer it.

Anyone receiving support through ESC will be able to stay in that scheme if they want to, but it will be replaced for new entrants by the new tax-free childcare vouchers when they are launched - which will build up over time to include all children up 12, with those under 5 eligible in the first year.

How can I get support before Autumn 2015?

The Government already invests £5 billion a year to support parents with childcare.

If you have a child aged 3 or 4 you are entitled to 15 hours a week of free early education and childcare. From 2014 around 40% of 2 year olds will also be able

to receive this. If you receive tax credits and you (and your partner) work 16 hours or more a week, you can get up to 70% of your childcare costs paid by government.

If you don’t receive tax credits, you may be able to get support through ESC, if it’s offered by your employer. This is where the Government provides tax relief on childcare fees. This system will begin to be phased out when the new voucher system is introduced.

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