CHILDCARE COST HELP FOR THE SELF-EMPLOYED

In early 2017 Tax-Free Childcare will be launched.  One of the points that jumped out at us and thought you might like to know is that self-employed parents will be able to get support with childcare costs in the Tax-Free Childcare, not like the current Employer-Supported Childcare scheme.

So, what is Tax-Free Childcare?

• Tax-Free Childcare will be available to around 2 million household to help with the cost of childcare with a registered provider, enabling more parents to go out to work.
• For every 80p you (or someone else) pays in, the government will put in an extra 20p. This is equivalent to the 20% tax that most people pay.  The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children).
• You can pay money in when you like, giving you the flexibility to pay in more some months and less in others. This could enable you to build up a balance in your account to use at times when you need more childcare than normal.
• It’s not just parents who can pay in – grandparents, other family members and employers may also pay in.
• The scheme will be available for children up age 12, and up to the age of 17 for children with disabilities.

Do you qualify?

• Tax-Free Childcare doesn’t rely on employers offering the scheme, unlike the current Employer-Supported Childcare scheme.
• The scheme aims to be flexible for parents. To qualify parents will have to be in work and each earning around £115 a week, but no more than £100,000 each per year.
• You will be able to get support from this scheme if you are self-employed parents. To support newly self-employed parents, the government is introducing a ‘start-up’ period.  During this, self-employed parents won’t have to earn the minimum income level.

What will you need to do?

• You will open an online (National Savings & Investment) account in to which you can pay in to, to cover the cost of childcare with a registered provider. This will be done through the government website, GOV.UK.
• The scheme will be rolled out gradually to families, with parents of the youngest children been able to apply first. You will be able to apply for all your children at the same time as soon as your youngest is eligible.
• All parents will be able to join the scheme by the end of 2017.
• There will be a simple log in service for you to view your accounts for all your children at once and review your circumstances every 3 months.

Do I have to swap schemes?

• If you currently receive Employer-Supported Childcare then you may continue if you desire as the Employer- Supported Childcare scheme will continue to run. The current scheme will remain open to new entrants until April 2018 – parents already registered by this date will be able to continue using it for as long as their employer offers it.

Here at Business Works we have done various calculations to work out which scheme would be best for some of our clients, taking in to consideration earnings, childcare costs, taxable income and salary sacrifice.

If you would like us to look at your circumstances or would like more information please do not hesitate to get in touch with us.

Source: gov.uk