Tax Free Childcare for Self-Employed Individuals


Graeme Cran

Graeme Cran

Tax Senior Manager

13 October 2017


    The Government has finally realised that self-employed individuals do not receive the same assistance with childcare costs as employed individuals. 

    Background

    Tax free childcare for self-employed individuals was introduced on 21 April 2017 and allows parents the ability to save via a new childcare account which ensures that for every 80p a parent pays into their account, the government will pay in an extra 20p. Parents can get up to £2,000 per child per year to help support childcare costs. The account can then be used to pay their registered childcare provider as long as the childcare provider is signed up to Tax-Free Childcare

    Conditions

    • Your child is under 12 and lives with you (up to age 17 if they have a disability)
    • You (and your partner) are employed or self-employed and UK resident (it is not applicable if one parent does not work)
    • Each parent earns less than £100,000 a year (this is not combined so each parent can have income of £99,000 and still qualify)
    • You can't use Tax-Free Childcare if you also receive childcare vouchers, Universal Credit or tax credits at the same time (for example, the scheme is not available to a parent that is both employed and self-employed)

    How it works

    • It will be rolled out over 2017 with children under 4 and parents of disabled children aged under 17 able to enter the scheme first. All eligible parents with children under 12 will be able to join the scheme by the end of 2017.
    • For every 80p you pay in, the government will top up the account with 20p of childcare costs up to a total of £10,000 - the equivalent of up to £2,000 support per child per year.
    • Parents and others (e.g. grandparents) can pay money into their childcare account as and when they like. This gives you the flexibility to pay in more in some months, and less at other times. This means you can build up a balance in your account to use at times when you need more childcare than usual, for example, over the summer holidays. It is also important to consider inheritance tax issues if grandparents are potentially contributing.
    • If your circumstances change or you no longer want to pay into the account, then you’ll be able to withdraw the money you have built up. If you do, the government will withdraw its corresponding contribution.

    Summary

     Tax Free Childcare Scheme
    Tax SavingsParents can save up to £2,000 per child, per year. There is no Employer saving
    Eligibility of ChildAvailable for children up to the age of 12 (up to 17 if disabled)
    Employed ParentsBoth parents must work to be eligible (unless single parent)
    Income CriteriaEach parent must work at least 16 hours. The upper limit for earnings is £100,000
    Commencement DateThe scheme will being rollout from April 2017 and will be available to all eligible families by the end of 2017

    How to register

    You can register or find out more about the scheme by following this link:

    https://childcare-support.tax.service.gov.uk/par/app/applynow