Tax-free childcare scheme comes into force

Implementation date: Early 2017

The Spending review and autumn statement 2015 confirmed that in families where both parents work and each parent earns less than £100,000 per year and a minimum weekly income equivalent to 16 hours at the rate of the national living wage, the Government will pay 20% of their yearly childcare costs (up to £2,000 for each child, or £4,000 if the child is disabled). The Childcare Payments Act 2014 introduces the new tax-free childcare scheme. The Childcare Payments (Eligibility) Regulations 2015 (SI 2015/448), the Childcare Payments (Eligibility) (Amendment) Regulations 2016 (SI 2016/793), the Childcare Payments Regulations 2015 (SI 2015/522) and the Childcare Payments (Amendment) Regulations 2016 (SI 2016/796) set out the detailed rules of the scheme.

The scheme applies to parents with children under 12 (or under 17 if the child is disabled). The scheme was due to launch in 2015, but was put back to 2017. The scheme will operate through online accounts and no involvement of employers is required.