In order to assist parents of young children to stay in the jobs market, the government has established a scheme which enables the parents to buy childcare vouchers which benefit from tax relief in the form of ‘salary sacrifice’. However, this scheme is not available to the self-employed and provides only up to 15 hours’ childcare or education per year.
From September, the 15 hour limit is to be increased to 30 hours, but this will be subject to the parents meeting income criteria: both parents must earn at least £120 per week and less than £100,000 annually; and HMRC requires confirmation of eligibility every three months. It should also be noted that not all childcare providers have signed-up to the scheme.
Two additional schemes are now being introduced which offer other options. In May 2017 a tax-free Childcare Account became available, which is basically an on-line savings account to which the government contributes, and which is used to pay for approved childcare. For every £8 paid by the parent, the government pays an additional £2, up to a maximum of £2,000 p.a. per child.
The second scheme, which will follow in September, enables parents of three and four-year old children to apply for 30 hours of free childcare or education worth about £5,000 per year per child.
Both these schemes can be accessed at the same time and are available through HMRC’s Childcare Choices site https://www.gov.uk/search?q=childcare+choices and a helpline is available on 0300 123 4097. However, reservations have been expressed about the complexity of the process for claiming benefits.