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Join your employers existing Childcare Voucher Scheme while you still can!

6th March 2015

Tax-Free Childcare (TFC) is the new government scheme that will be introduced in Autumn 2015.

We have still not received any further update from HMRC in relation to the exact launch date and also the finer details of the scheme have still yet to be announced. However, in summary this is what we know so far:

  • The new TFC scheme will be introduced from Autumn 2015 and will allow eligible parents to save up to £2000 per child on their annual childcare bill.
  • Parents will be able to open an online account, which they can pay into to cover the cost of childcare with a registered provider. This will be administered by National Savings and Investments rather than their employer.
  • 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. So for every 80p the parent or someone else pays in, the government will top up an extra 20p.
  • For accounts for disabled children, the maximum payment from government will be doubled to £4,000. This means that a parent with a disabled child will be able to pay up to £16,000 into their childcare account per year and receive top-up payments of up to £4,000.
  • All children under 12 will be eligible for TFC within the first year of the scheme’s operation. (For children with disabilities this will be up to the age of 17.)
  • To qualify, both parents will have to be in work, earning just over an average of £50 a week and not more than £150,000 per year.
  • The scheme will also be available for parents who are self-employed.
  • Parents who are currently registered on the existing Employer Supported Childcare (ESC) voucher scheme will be able to remain on the scheme for as long as your employer continues to offer the scheme. However, if a parent changes employer after Autumn 2015 they will lose this entitlement.
  • Parents will be able to choose whether they continue on the existing ESC scheme or move to the new TFC scheme. However, you cannot be in receipt of support through both schemes at the same time and if you do switch to TFC, you will not be able to re-join ESC at a later date.
Not all parents will be financially better off on the new TFC scheme. Some examples of where this will be the case are detailed below:

  • Families with only one working parent. If a family has only one working parent, they are not eligible to join the TFC scheme, however, single parent families are eligible.
  • Families with children over the age of 12 using childcare.
  • Families with lower childcare costs. For example families that only use childcare a few days a week, for before and after school care or for holiday clubs would typically have lower childcare costs and are likely to be better off on the current ESC scheme.
  • Families wanting to keep their Child Benefit payments. Entitlement to child benefit is based on the applicant's gross annual salary. As the current ESC scheme is a salary sacrifice scheme this reduces the overall gross annual salary and potentially means that some parents remain within the thresholds to receive child benefit.

We will provide a further update via our website as and when further information regarding TFC becomes available.

Not all parents will be better off on the new scheme and some will be ineligible to join. Join your employers existing scheme while you still can.