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Top things childcare providers need to know about Tax-Free Childcare

The Government has published new guidance, Top things childcare providers need to know about Tax-Free Childcare.

Tax-free childcare (TFC) was announced by the Government in 2013 as a way of supporting families with meeting the cost of childcare. The scheme will offer eligible working families 20 per cent support towards the cost of their childcare up to an annual limit of £2000 per child (or £4000 if the child is disabled).

Operated through an online account, parents will pay money towards qualifying childcare costs and the government will automatically make "top-up" payments of 20p for every 80p that families pay in. In a year, if an eligible family pays £8000 into their TFC online account, the government will top this up to £10,000. Parents will then be able to make payments for childcare costs directly to their nominated childcare provider(s) through this account.

TFC will be rolled out gradually in early 2017 on an age-based approach, allowing parents of the youngest children to enter first. Families with multiple children will be able to join the scheme when their youngest child becomes eligible, and at that point they will be able to receive support for all their qualifying children. All disabled children will be prioritised so they will join the scheme early on in the rollout process.

Childcare providers will be able to sign up for Tax-Free Childcare from September 2016. The Government are recommending that providers take three steps now to ensure they are ready:

  1. Check that Ofsted (England) or CSSIW (Wales) has your latest business address and email address so that the Government can send you a letter inviting you to sign up
  2. If you’re running your own business, check that you have your business’s ten-digit Unique Taxpayer Reference (UTR) as you’ll need this to sign up. You can find this on tax returns or other communications from HM Revenue and Customs. If you’re employed as a nanny, and don’t have a UTR, then you’ll need your National Insurance number
  3. Look out for your invitation letter from September. Please keep it safe, as it will contain your ‘user ID’ and tell you how to sign up. You’ll be able to sign up as soon as you’ve received your invitation.

PACEY is involved in implementation forums to help ensure that the new scheme is workable for childcare professionals, and we will share more details as it is available. If you have any questions about Tax-Free Childcare, please contact the PACEY policy team.

See also: Tax-Free Childcare: 10 things parents should know