Childcare costs can be pretty overwhelming in today’s economic market, with many parents feeling that they instead have to take a lengthy career break to look after their children.
For the self-employed, it can be even more of a strain as the previous tax-free childcare scheme ‘Employer-Supported Childcare’ wasn’t available to self-employed parents.
But the government’s new childcare tax scheme is finally coming into effect, and it has been extended to include self-employed parents and carers.
Its aim is to help support parents to continue developing their career whilst ensuring that they can meet the expense of childcare. More people working and paying into the economy, and more parents able to sustain and develop their careers: it’s win-win.
How do I qualify?
Qualifying for the scheme is simple: both parents have to be in work, each earning more than £120 per week but no more than £100,000 per year.
However, as a bonus for self-employed parents, there is a 12-month start-up period where these minimum costs don’t need to be met. So, you’ve got time to set up your business and get on your feet whilst still benefitting from the scheme.
If you’re self-employed and struggling with your accounts and tax-returns, then accountancy firms that specialise in self-employed contractors and freelancers such as Taxup Contractor Accountants can help provide support, and assess your income and eligibility for this scheme.
How the scheme works
The scheme requires you to open an online account which you pay into and withdraw from just like your other banking accounts. The simple log-in service will allow you access to your account, and you can set up a separate account for each of your children aged 12 and under, or aged 17 and under for children with disabilities.
For every 80p you pay in, the government will pop in an extra 20p top-up – the equivalent of covering 20% of your childcare costs, up to a limit of £2,000 per child and £10,000 in total. If your child has a disability, this limit of £2,000 is doubled to £4,000.
You can only use the money to pay registered childcare providers who have signed up receive Tax Free Childcare Payment, so check to see if your current provider has registered here. It’s worth bearing in mind that you won’t qualify for the scheme if you currently already receive free or subsidised childcare, or childcare vouchers from one parent’s employer if you’re not both self-employed.
It has flexibility
The new childcare account is flexible too: you can pay in as much or as little as suits you and spend the money as and when, which means that the greater expense of school holidays can be covered.
Parents also don’t have to be the sole contributors to the account – anyone can pay in, from grandparents and relations to kind family friends! Every three months, you’ll be asked to confirm your current situation via the simple online account system.
You can withdraw the money you have put in at any time if your circumstances change, but you’ll lose the government’s contribution if you use the money for something that isn’t childcare.
When it begins
The scheme isn’t fully rolled out yet, and parents with children under the age of four (by 31st August 2017) or those with disabled children under 17 will be the first people to qualify for the scheme, although it will be extended fully by the end of 2017.
If you register here, then you’ll receive an email that will alert you when you are eligible to create your new online account and start benefiting from the Tax-Free Childcare scheme. Being self-employed and having young children is never easy, but hopefully this should make things a little simpler.