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57% of households will be financially worse off under the Tax-Free Childcare scheme


Parents must be free to choose the funding scheme that best suits their needs

Tax-Free Childcare was launched in October 2018 to provide a government top-up of 20% on childcare spend up to the value of £2,000 per child per year, based on a spend of £10,000. If a child is disabled the maximum saving is £4,000 per year.

Tax Free Childcare is an alternative scheme to the Childcare Voucher Scheme and has different eligibility criteria.

For instance, although Childcare Vouchers can be used up to the age of 15, Tax-free Childcare is only available up to the 1st of September following a child’s 11th birthday or 16th if they are disabled.

You cannot claim Tax-Free Childcare unless all parents in a household are working or if you are in receipt of tax credits.

You also cannot use Childcare Vouchers and Tax-Free Childcare at the same time.

If you are in a Childcare Voucher Scheme already, you can continue using it as long as you remain eligible. If you leave the scheme to use Tax-free childcare or change employer you won’t be able to re-join a scheme.

Employees who have temporarily opted out of Childcare Vouchers, for example due to maternity leave or a career break, can re-join the Childcare Voucher scheme and will remain eligible provided they joined the scheme prior to 4 October 2018, have made at least one salary sacrifice (more than £0) within each 52 week period since then, have not left the scheme to use Tax-Free Childcare, and have not changed employer.

For example, if an employee opted out of Childcare Vouchers in June 2022, they would be able to re-join their employer’s scheme provided they made a salary sacrifice payroll deductions in May 2023 and each year after that.

Some families will be better off using Tax-Free Childcare, while others are better off using Childcare Vouchers, Tax Credits or Universal Credit, or a combination of these.

If you leave a Childcare Voucher Scheme and have credit in your account, you can still use them to pay for registered childcare.

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