What is the role of employers in the Tax-free Childcare scheme?

Employers are not obliged to play a role in the Tax-free Childcare scheme as the scheme will operate directly between parents and the Government. Parents will be able to set up and pay into their own childcare accounts online, which the Government will then top up at the rate of 20%, up to an annual limit of £2,000 per child (or in the case of a disabled child up to £4,000). However, employers can choose to play a voluntary role by providing employees with information on the scheme and/or by paying into employees' childcare accounts.

Employers can act as a source of information on the scheme, for example by referring employees to the Government web portal for advice. A useful time to provide this information may be prior to and on return from periods of family-related leave. This option may appeal to employers that do not currently offer employer-supported childcare (ie childcare vouchers or directly contracted childcare).

Employers can also choose to pay into a childcare account if they wish to do so. This could be done by facilitating payment into the childcare account on behalf of the employee. Under this option the employer makes the payment into the childcare account directly from the employee's net pay via the payroll system. Alternatively, employers may choose to make additional payments into childcare accounts without an employee's net pay being reduced. In this case, the additional payment made by the employer will be classed as earnings and subject to appropriate tax and national insurance deductions. Instead of making a series of smaller payments, employers will also have the option of making one bulk payment.

Should employers choose to take up a payment role within the scheme, they would not be required to take on any wider responsibilities such as checking an employee's eligibility for Tax-free Childcare. This would remain the Government's responsibility.

The Government has said that Tax-free Childcare will be introduced in early 2017.