Should childcare be tax free?

moneyIf you have to pay for childcare, you’ll know that the cost can be crippling and take up a big proportion of your income. The Government has announced plans to introduce a new Childcare Scheme to support families with childcare costs. From Autumn 2015, the scheme will be available, initially, to children under the age of 5. It will be expanded over time to include all children under 12. For every 80p in the £1 contributed by parents an additional 20p (or 20%) will be funded by Government up to a maximum of £6,000.  will replace the current salary sacrifice scheme.

Unlike its predecessor, the new scheme will be available to the self-employed and those on a minimum wage.  Parents will be able to choose their own voucher provider as the new system will not be administered by employers. Vouchers can be used at any Ofsted regulated childcare facility in England and the equivalent bodies in Scotland, Wales and Northern Ireland.

The scheme will provide support for families where both parents are working and not in receipt of the Childcare Element of Working Tax Credits/Universal Credit. Additionally, in order to be eligible, neither parent can earn more than £150,000 a year.

HM Treasury have published a consultation that seeks views from parents, childcare providers, employers and current and potential future voucher providers on a number of detailed proposals for the design of the new scheme. Commenting on the launch of the consultation the Chancellor of the Exchequer said:

‘We want to make the new scheme work in the way that is best for parents, so today we are asking for their views, and I’d like as many parents as possible to tell us what they think.’

Share your views here. 

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