The new childcare tax-free scheme has been announced today by Government but what does it mean to mums and dads around the UK? Will it really make a difference? We got the chance to put some questions to the Deputy Prime Minister about the changes, see his answers below and let us know what you think about the changes by leaving us a comment or joining the conversation in the Netmums coffeehouse.
1.Tell us about the new plans
For many parents, it’s not the mortgage payment or utility bills that squeezes their budget, but paying for good childcare. We’ve already increased the hours of free childcare available to every family with a 3 and 4 year old to 15 hours a week. And, if you’re on a low income with a 2 year old in the family, you can also now get 15 hours a week of free early years’ education for your children – and we’ll be doubling the number of families who will be eligible for this in September.
This week, as part of the budget, I can announce three things:
Firstly, if you’re a working family with children under 12, which doesn’t receive tax credits, Universal Credit or Employer Supported Childcare, but both parents are working or you’re a lone working parent, the government will provide 20% of your child care costs up to £10,000 a year.
This will cover parents working full-time and part-time as well as, for the first time ever, those mums and dads who run their own businesses. This will provide the equivalent of £2,000 per child, per year for every working family, except those on extremely high wages.
Secondly, we’ve also decided to give more help to the working families who receive Universal Credit by investing £400 million to boost the contribution we give you for up to 85% of your childcare costs. This means that you can be sure that work pays. It won’t happen straight away, but we’ll bring it in as fast as possible.
Thirdly we’re giving £50 million to early education providers as a cash boost to help 3 or 4 year olds from poorer families. These children often fall behind early. So, if your child needs it, this investment means they can get extra attention to help them progress alongside their classmates.
2. Will everyone be better off with the new tax free childcare scheme, and if not, why is this better than existing childcare vouchers?
Most parents will be better off under the new scheme. The great news is that tax-free childcare will be open to at least twice as many families as the old vouchers system. For a family with two children the maximum level of childcare costs covered under the new scheme is three times the amount under the voucher scheme. Nearer the time, the Government will provide clear and simple advice for parents to help them decide on which scheme is best for them.
3. How soon will it happen and what do parents need to do to take advantage of it?
From Autumn 2015 parents will be able to open an account through a short form online. It will be a bit like online banking, and you will be able to use the same website to manage the account for all of your children. Once you have applied, the government will confirm your eligibility within a few days. Then you will be able to pay money in whenever you like, or pay a set amount each week or each month when you get paid. Your loved ones can also pay into the account if they like.
4. How is it tax free? Will I need to complete a tax return?
For every 80p you or someone else pays into the account, the government will top this up with an extra 20p – the equivalent of the tax rate that most people pay. You won’t have to do a tax return, but you will have to fill in the online form, then the government will check your eligibility and open the account.
5. Will the voucher scheme and the new scheme run in tandem? What if I’m already in a voucher scheme?
You don’t have to switch if you don’t want to. The Employer Supported Childcare scheme will continue to run for as long as their employer continues to offer it and you remain with that employer.
6. Netmums members have stated in a recent poll that more jobs with flexible hours are needed, is this something the Government have considered?
I know how important flexibility in the workplace is for parents. That’s why I’ve personally championed extending the right to request flexible working to all employees, and the introduction of shared parental leave from next year. We need to make sure that modern workplaces reflect the needs of modern families.
7. Under the old scheme, parents could save up to £2,916 a year each. Are there any plans to increase the tax free element to match this?
Under the Tax-Free Childcare scheme, parents can save up to £10,000 a year per child which means that the government will top this up to a maximum of £2,000 per child.
8. Can lone parents claim it? And what about couples where only one parent works?
Yes as long as you’re earning £50 a week or more, you can take advantage of this scheme. We will also make it available for the first time if you are on maternity, paternity or adoption leave and for those starting their own business who may not meet the minimum earning requirement.
This system has been designed for working parents, so if one parent stays at home to look after the kids, then families will continue to benefit from 15 hours per week of free childcare for all three-and four-year-olds. For lower-income households, this will also be available for two-year olds.
9. Why will it stop when a child reaches 12, when previous schemes went up to 16?
We wanted this scheme to benefit as many people as possible, so it focuses on those who need it most to pay for the most costly care, which tends to be for younger children. Children with disabilities will be eligible to claim Tax-Free Childcare up to the first week of September following the child’s 16th birthday.
10. For how long will 85% of childcare costs be met under Universal Credit?
To the age of 16. When we introduce this, it will help more families move off benefits and into employment, and this should cover the bulk of the cost of childcare for around 300,000 families, making sure work always pays.
11. If people want to get advice or help on how the new scheme will affect them who should they talk to?
We’re publishing lots of information today about how the new scheme will work, and as it gets nearer to the time we’ll make sure that parents get all the simple and straightforward information and advice they need to make the right choices. For details of today’s announcement go to gov.uk/dpm
I’m determined that every family has the opportunities they need to succeed. So whenever money has become available, I’ve focused on investing in things like childcare. I’ve pushed hard for Government to reform, simplify and modernise our system to help modern families. With many families still facing difficult times, this support will help make your choices easier and your money go further. That’s my commitment to you: to build a fairer, stronger Britain where every child and parent can prosper.
Let us know what you think about the childcare changes. Leave us a comment or join the chat on Netmums. Visit the Netmums work and childcare section. Find local childcare options on your local Netmums childcare board.