New Tax-Free Childcare scheme: Will it work for you?

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"Almost two million families will receive support for childcare costs under a new scheme, but will you be better off? "
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New Tax-Free Childcare scheme: Will it work for you?

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  • economum
    economum Posts: 145 Forumite
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    Wouldn't have worked for me - the employee vouchers gave me national insurance as well as tax back and as I was only working part-time I didn't need the full amount. It also gave my employer some relief on the national insurance contributions which I guess they will now start to loose?
  • sue1971panda
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    Not sure the new scheme will work for me either. I don't need the full amount of vouchers and both employers offer salary sacrifice. Not sure how it will interact with tax credits.

    As always, great on a headline, but how simple it is to use will be the key.
  • SunsetZed
    SunsetZed Posts: 8 Forumite
    edited 20 March 2014 at 10:30AM
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    I think this article should be clearer that the £2000 per child is percentage based whereas the childcare vouchers are not.

    For me the new scheme would work better than childcare vouchers do currently but if my wife drops to do fewer days per week then we would end up worse off. Also when our little one hits three and we get 15 hours a week free then this swings things back in favour of childcare and if labour win the next election and increase this to 25 hours then childcare vouchers would also be best.

    Looking further ahead to school age childcare costs drop significantly so in this scenario childcare vouchers are a far better option too.

    Finally as childcare vouchers are normally administered as salary sacrifice then for anyone earning between £50-£60k will also be entitled to more child benefit under the childcare voucher scheme as it reduces their assessed income so this will be a consideration for some.

    I don't think that over the course of children growing up many families who have childcare vouchers would benefit from the new scheme unless they have at least 3 children. That said it is good that all those who were unable to access childcare vouchers due to their employers stance are now getting some help.
  • rdty21
    rdty21 Posts: 72 Forumite
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    I'm a little confused as to how this new scheme would benefit us. Our boy will be going to childcare from September. We work out that the cost over the year for this is just over 6k/year 3 days/week before any voucher scheme discount.

    My wife will be going back to work so we are both employed full time, and both of our employers offer the salary sacrifice voucher scheme. We are both basic rate tax payers. To my knowledge the current scheme offers tax and NI savings, therefore surely I would be better off sticking with them.

    Can anyone shed any light in this please. Thanks.
  • SunsetZed
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    Hi rdty21 so in your scenario you would be entitled to £1,866 per year in childcare vouchers (which you can claim as soon as the child is born so speak to your employer now if you aren't already!).

    Under the new scheme (doesn't start until Autumn 2015) you would get 20% of £6k so £1,200 so you would be better off with the existing childcare voucher scheme.
  • rdty21
    rdty21 Posts: 72 Forumite
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    Hi, thanks. I was just looking into the max allowable per week on the existing scheme. I actually forgot there was a weekly limit if I'm honest hence asking the question in the first place.

    Am I right in thinking that once I am signed up to the salary sacrifice scheme, I can stay on it even when the new scheme comes into place?
  • turtlemoose
    turtlemoose Posts: 1,648 Forumite
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    This document https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293084/PU1607_Tax_free_Childcare_response.pdf

    is misleading.

    It says:

    1.5 Tax-Free Childcare will provide 20 per cent of working families’ childcare costs, up to an
    annual limit of £2,000 Government contribution for each child.


    So that's 20% of your actual costs...

    but then it goes on to say:

    1.9 Parents will register with the Government 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 a limit of £2,000 Government support per child per year.


    which makes it sounds like regardless of your ACTUAL costs, you can claim up to £2000 a year.

    So which one is it?!
  • rdty21
    rdty21 Posts: 72 Forumite
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    The Government will
    then ‘top up’ payments into this account at a rate of 20p for every 80p that families pay in,
    subject to a limit of £2000

    It seems clear to me that if your childcare costs add upto 10k or less, the government will effectively give you a 20p refund for every £1 you pay. So if you claim the full amount, yes you get a 2k "refund" or discount.

    If you only need to pay 5k for your childcare, you get the same 20p per £1 discount, but that will only equate to 1k.
  • turtlemoose
    turtlemoose Posts: 1,648 Forumite
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    Point 1.9 says it is a "limit of £2000.... per child per year" .... not "20% of childcare costs up to a limit of £2000 per child per year" - those are two different things.
  • rdty21
    rdty21 Posts: 72 Forumite
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    But it says 20% of childcare costs upto an annual limit of £2000 in point 1.5.
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