Today, the Government launched a 12 week long consultation on the details of the Tax-Free Childcare   

At Budget 2013, the Government announced the introduction of Tax-Free Childcare for working families. The Government will provide 20 per cent of working families’ childcare costs, subject to an annual limit of £1,200 contribution from the Government for each child. This is equivalent to basic rate tax relief of childcare costs up to £6,000 a year. The Government has set aside £750 million per year to support Tax-Free Childcare, and this expenditure has been reflected in the Government’s decisions at the Spending Round 2013.

Under Tax-Free Childcare, parents will register with a voucher provider and open an online account. The Government will then ‘top up’ payments into this account at a rate of 20p for every 80p that families pay in, subject to the above limit

Households in which all parents work but do not receive support through tax credits (or Universal Credit) will be eligible for Tax-Free Childcare, so long as neither parent is an additional rate taxpayer. Households that receive tax credits or Universal Credit will get support through those systems.

Tax-Free Childcare will be phased in from autumn 2015. From the first year of operation, all children up to age five – and disabled children under the age of 17 – will be eligible. The scheme will then build up over time to include children under 12.

Liz Bayram, Chief Executive, PACEY comments: "Any new funding to help working families with the cost of childcare must be welcomed. These proposals increase the help available to families with more than one child and reach families who currently do not benefit from employer supported childcare vouchers. That said, there are a number of concerns that PACEY will be raising through this consultation, in the hope that Government will reflect again on some of the limits it has currently set for the scheme. PACEY would like to see access to the scheme for parents of school age children brought in earlier and changes made to the current parametres, so that families on lower incomes can benefit. As well as helping with childcare costs for more families, these changes would mean more children would be cared for in safe registered childcare."