Tax Free Childcare – Introduction to the New Schemes for 2017




Tax-Free Childcare

The cost of childcare is often a deal breaker for parents wanting to return to work. Parents for years have been weighing up the costs of childcare versus what they earn. Sometimes it’s just not worth it, so many mums in particular stay at home until the youngest child is at school.

I have always returned to full time employed work after my babies were born and from 2008 to 2015 I have always paid a lot for childcare. At my most expensive time, I was paying £1200 per month with Jack as a baby, and before and after school care for Dylan and Josh.

I remember when I was looking for a job when Josh was 6 months old, the job I found had to pay at least 50k to make it feasible to afford to pay the bills as well as the childcare.

How the new tax free childcare work and can it save you money by Lynn at Mrs Mummypenny UK

I used a nursery for 6 months when Dylan my first child was little. This was a rather expensive and inflexible so we swapped over to a childminder and have been with the same person for 8 years now.

We are more than happy with our children in this childminder setting. The costs are lower with much more flexibility and it feels like a more caring environment. The childminder option also gives the option of before and after school car with drops off and pickups.

The government is introducing two new schemes this year that should make childcare more affordable so I want to share the facts with you and my thoughts.



Tax-Free Childcare. Pay £8 get a £2 bonus

Two million working families will be eligible for Tax-Free Childcare. Go to this link to pre-register for updates as to when you can join the plus there is a handy calculator that will tell you what you are entitled to. It will be gradually rolled out, with parents of children under two invited to enter the scheme first.

By the end of the year, all eligible parents will be able to receive government top-ups of £2 for every £8 that a parent pays into their Tax-Free Childcare account. This will be open to all working parents across the UK with children under 12, or under 17 if disabled.

The government will contribute up to £2000 per year per child. This can be used to pay for childcare at any provider if they register with the government service. To be eligible you both must be earning at least £120 per week and less than £100k per year.

This feels simpler than the previous childcare vouchers scheme where money was taken from your pre-tax earnings and you have more control over what you pay into the scheme for a top up.

You could overpay for a few months and build up the balance that might pay for the more expensive childcare needed during the school holidays. I will be signing up and paying money in to get a 20% top up on my childcare costs. I don’t get any relief at all on my childcare bills so this is gratefully received.



Free 30 hours’ childcare for 3 and 4-year-olds.

At the moment, we all get 15 hours’ free childcare at participant childcare providers from the term after they turn 3. This is being increased to 30 hours. From the high-level information that the politicians are talking about it feels like a win for working parents.

The scheme will again be administered through the same childcare website from the government.

This scheme comes into force just as my youngest starts school so I will miss out on the offering but I’m not convinced it will be that widely available.

My youngest goes to Pre-school that is at capacity for children numbers with a waiting list of two years. How is a setting like this going to increase the childcare from 15 hours to 30 hours when they are already at capacity, child and staff wise? I would assume that many popular pre-schools will be in this situation as well.

There is talk of combining childcare settings with the 30 hours being split between maybe a preschool and a childminder? Childminders are going to have to evolve to start accepting this form of payment for childcare.

This 30 hours of childcare is also just for the term time so there are another 14 weeks of school holidays where childcare costs will be payable if parents can’t arrange cover or take holiday themselves.

It feels like a great headline idea, but in practice, I will be interested to see how it plays out in reality. I joined a discussion panel on Share Radio today to discuss the schemes, take a listen here

Here are the summary facts

Who is eligible?
Tax-Free Childcare 30 hours’ free childcare
Child age Under 12

Under 17 for disabled children

3 and 4-year-olds
Income Parents need to be working – each parent needs earn £120 a week and less than £100,000 per annum.
Geography UK-wide England
Employment Available regardless of parent’s employer, and also available if self-employed.

 

Can it be used with other childcare offers? Not in addition to Employer-Supported Childcare, tax credits or Universal Credit Yes, can be used with other Government support such as Employer-Supported Childcare, tax credits or Universal Credit

 

Do you think these changes are going to save you any money?



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Lynn Beattie

Aka Mrs MummyPenny

Personal Finance Expert

I write about personal finance made simple, lifestyle choices that will save you time and money, as well as products and services that offer great value.

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17 Responses

    1. One of my best friends is a childminder and I did discuss this with her. She think that she will be charging a top up to bring the payment up to her regularly hourly rate. So no the childcare wont be free.

      1. Unfortunately, as childminders we are notlegally allowed to charge a tip-up fee. All we can do is charge for food and consumables that we may have previously provided for free. However, we can only do this is we charge all parents, including those who are not funded. This means childcare could become more expensive for any families whose children are not yet eligible for 3 & 4 year funding.

  1. Childminders have been offering funding for years! So no evolving required! However, the real question is whether they will be able to afford to provide 30 hours funding when the rates paid are very often well below their hsual rates.

    I live in Surrey and my rates are £5.75 an hour, including food, which is cheap for my area. However, the funding rate for the 30 hours a week will be £4.51, so for each child I offer funding to, I will lose over £700 a year. I currently have 4 children whose parents want to use the 30 hours here from Sept. If I say yes to all of them not only will I lose £3000 a year in fees, but my council pays the fees three times a year in arrears, so i have to wait four months to be paid significantly less.

    1. Thats a huge loss for you and a cash flow issue. Maybe your parents can top up in some way? I would never expect my childminder to be out of pocket if I chose to have them look after my children. Once you find a great childminder you never let them go!

  2. ‘Childminders will have to evolve’?

    Evolve to make a loss to provide parents with ‘free’ childcare? As that’s essentially what you’re suggesting.

    Childminders can provide the same funded hours that nurseries and pre schools do. Many choose not to however as if you can fill your 3 (yes, just 3 and that will include your own children) spaces with under 3s who pay full price, why would you offer funding to 3/4 year olds and lose money (I’d make a loss of over £2,300 a year based on funding versus my hourly rate)?

    The government is dangling a carrot that can’t be delivered and are setting up the childcare sector to be the fall guys. What a sad state of affairs.

    1. I dont know any childminders that offer the 15 hours free now..yes they can currently fill their hours with fully paid, as would I. Maybe its evolve in charging for other stuff? I cant see how it will work personally.

  3. I used to work on a government study of childcare and most parents who looked after their children in the pre-school years, particularly 0-3 reported doing so because they really really wanted to – and because they felt it was an important start for the child and it was their preference, by far. Some might be surprised that it was not because the costs of childcare were deemed to be a barrier to going back to paid work. In fact cost of childcare sometimes was a politically acceptable reason to give when asked the inevitable ‘why aren’t you back in work yet?’ because for some reason (we live in strange anti-family times!) mothers and fathers have been led to believe that home care is not important and that nursery care is a must! It’s not! This is an important point because it gives the impression that more available childcare up and down the country will magically lead to all mothers/fathers feeling their child is ready to separate from home and that they will be able to find suitable paid work and that their child will be happiest with a replacement care provider. This is simply not the reality.

    1. This is a good point. I was desperate to stay at home with my little ones but just couldnt financially do it. I started my own business 2 years ago so have had all this time with my youngest which we have loved. But I missed out with my 2 elder boys as I was in full time work then.

  4. Gosh, we wish some of the local councils in Scotland are over crowding the nurseries with 2 – 5 year olds to keep the funding and putting hundreds of childminders out of business which as you know is a big blow for parents like you who love a childminding caring environment. We fear that our children will be in a school environment in the future from aged 2. WE are trying to evolve, we are all fully trained to the same level as the nursery staff and in most cases we are getting higher grades than nursery settings – even the Scottish Minister the Finance Minister want us involved – but not the councils. Our voices are not being heard. At the moment there are 41,600 childminders in the UK (this has declined from 49,385 since 2015), and this looks likely to fall, which will have an impact on the UK employment levels but more importantly all these childminders pay for services (who will be impacted), pay for tax and national insurance just like every other self employed individual so this will also have an impact in the UK tax levels. Great isn’t it and all in time for Brexit too!

    1. This is what it feels like..that nurseries will be more able to provide the 30 hours funding (due to size, scale and number of staff) and childminders will suffer as a result and lose business. I suspect that 41,600 number will reduce with this change.

  5. As a childminder of 18 yrs I actually find your statement of ‘Childminders will just have to evolve’ very patronising. Many of us fought to deliver the funded hours so therefore expanding provision choice for parents and lowering their childcare fees. We get paid less than our normal childminding rate but now we are being dictated to by the government therefore a cap on our potential income as limited ratios. Add to that we are usually a 1 person business and work in excess of 50 hrs per week we are now expected to be paid just 3 times a year for funded children. So in effect less pay for more work and wait for our payment & our own families are expected to subsidise those who work as little as 16 hrs a week for up to £100k a year each!
    I’m sorry but where did the logic if you can’t afford to bring them up yourself and provide for them financially then don’t have them go? I have 4 children 21, 15, 7 & 5. The gap between the eldest 2 is down to not being able to afford a 2nd child and waiting for circumstances to be right. The youngest a change in family and being able to afford to bring up my own children not expectations for others to provide for them. I worked 2 jobs for 5 years 1 full time and 2nd part time 20 hrs, then increasing to 5 jobs to make ends meet. Too many people have the want it all now culture and sadly have their priorities all wrong. Your children are priceless and a huge responsibility to care for in the childcare sector yet dog walkers, cleaners and gardeners get paid more per hour. It’s a sad state of affairs.

    1. My best friend is a childminder so I do understand your points. And when you put it like that in your second paragraph its a fair point abut affordability of having children. I have said many a time during my employed career I couldnt have done it without my childminder, now my best mate.

  6. I’m a childminder and have been offering funded sessions and working with other settings for years. I don’t need to ‘evolve’.
    What I need is to be paid a reasonable hourly rate. As it is, I won’t be offering any funded sessions any more.

    1. I stand corrected I didnt realise childminders offered funded places. None of them do in my village. I cant see how childminders will be able to afford this increase to funding so I dont blame you changing what you are doing.

  7. I hear about the paperwork getting more and more from my best mate and yes this is only going to get worse. Observations alone..so time consuming.

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