Tax free childcare – what does it mean?
Most childminders, nannies registered with Ofsted and other early years providers received emails last week from Foundation Years about the new tax free childcare scheme but they left many colleagues confused about what is happening.
This is what we know so far –
1. Tax free childcare will eventually replace the current voucher system – the one where parents can pay up to £243 a month into a voucher (as long as their company is signed up to a scheme) and it’s handed over to the childcare provider via a 3rd party company such as Computershare or Sodexo.
2. The tax free childcare scheme will be administrated by National Savings and Investments (NS&I).
3. All childcare providers including childminders and nannies will have to sign up for the tax free childcare scheme. If you received the email telling you about the scheme, then you will receive the invitation to sign up because they have your correct details.
If you did not receive the email then you need to review and update your details with Ofsted (Ofsted pass details over to NS&I).
4. Sign up for providers will happen during September and October 2016 – you will receive a user ID from HMRC and you will be able to register online using your Unique Taxpayer Reference (UTR) which should be on your tax return.
If you don’t have or have lost your UTR you will need to request one through the HMRC online self-assessment portal – https://www.gov.uk/register-for-self...sment/overview.
Ofsted registered nannies will be able to sign up for tax free childcare using their National Insurance number.
5. Sign up for parents will be during 2017 (parents with young children will be contacted first) and parents who currently use vouchers will have to make a choice between vouchers and the new scheme – they won’t be able to use both.
The voucher companies are probably going to encourage parents to stay with them because they will lose business if everyone moves over to the tax free childcare scheme! Sodexo have already produced a leaflet 'encouraging' parents to stay with them - http://www.tax-free-childcare.info/w...nfographic.pdf.
6. Parents who are in work or self-employed and earn more than £115 a week will be able to sign up for the scheme. Parents will need to confirm their childcare payments every 3 months (HMRC state they will be able to do this using a ‘simple online form’) to continue receiving the tax free childcare payment contributions from the Government.
There will be special rules for income for the self-employed including new self-employed businesses.
7. Parents (and relatives and employers) will be able to put up to £8000 a year into a Childcare Account to pay for their children’s childcare (each child will have their own account). The Government will add 20% to the total paid in by the child’s family to a maximum of £2000 – the current rate of tax (hence the name ‘tax free’ childcare).
Some articles suggest that the payments will be made quarterly by the Government – so up to £500 a quarter. This has yet to be confirmed by the scheme.
There is more information for parents about the scheme, including parents of disabled children who will receive extra from the Government, here –
https://www.gov.uk/government/news/t...ts-should-know
8. Parents will pay providers directly from their Childcare Account – which is why childcare providers need to be signed up to the scheme first. Parents will be able to find out if their provider is signed up by searching for them.
Plans are still being implemented but we are told it will make the process much easier. You can find more information for providers here –
https://www.gov.uk/government/news/t...rs-should-know.
If you have any further questions I am sure they will be answered over the coming months :D
