The government wants to end the childcare vouchers and replace it with a free childcare – a new scheme. Free childcare will go live this year in April 2018 and will run alongside childcare vouchers until it eventually replaces the olds scheme.
For parents already signed up to childcare vouchers you can continue to stay in the old scheme but you cannot take advantage of both scheme. This means for most parents you will have to choose between the two.
To support our parents in Bradford city we will look at both schemes below and weigh up the benefits. Lot depend on your own family circumstances including your family size, how much tax you pay etc.
Tax free Childcare – how it works
This is the new scheme and it works this way – for every 80p you spend on childcare the government will pay you 20p to match it. And the government is ready to pay up to a maximum of £2000 a year per child. From figures available 2 million households will be eligible for tax free childcare by the end of the year.
To qualify, parents will have to work 16 or more hours, and each earn at least £115, per week, but no more than £100,000 each per year (combined income in excess of £100,000 is fine).
The scheme is available for children up to the age of 12, or 17 for children with disabilities.
Parents can apply by opening an online account through Gov.uk, which they pay into, and which will then be topped up by the government.
Childcare vouchers
The current childcare scheme is offered to parents through their employers, allowing them to pay for childcare costs via salary sacrifice.
This means that you are paying for childcare out of your pre-tax and national insurance income.
The Tax-Free Childcare scheme will run alongside, and eventually replace, the Childcare Vouchers scheme
This means you pocket an extra £300 for every £1,000 used towards childcare.
Basic-rate taxpayers can claim up to £243 of childcare vouchers each month (£55 per week), per parent, so two working parents could get £486 of vouchers each month.
So which scheme is the best if you are eligible for both?
According to the experts – Martin Lewis; from MoneysavingExpert, the new Tax – Free Childcare scheme is the best option if you have lots of children and a high childcare cost.
And reason is not hard to workout. You can get £2000 year per child; so if you have 4 children that is £8000.
On the flip side, if you have fewer children and lower childcare cost, while you can get 20% off childcare cost with Tax-free Childcare; depending on your tax status you can get between 32% and 47% off with the vouchers.
So here is the verdict – , if you’ve got big childcare costs Tax-Free Childcare is best, if you’ve got smaller costs, childcare vouchers win.
Also, keep in mind that the new scheme will only be available to parents with children up to the age of 12, whereas the old system is available for kids up to the age of 15.
By
Admin – Little Horton Lane Nursery
Visit our web page for similar blogs (www.littlehortonnursery.co.uk) Call us on 01274557143 We provide childcare at Bradford City centre 2 min away from Bradford Uni. And 3 min away from Bradford interchange.