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Coming soon: tax-free childcare for contractors!

Tax-Free Childcare For Contractors

Tax-free childcare is coming

Tax-free childcare for contractors and the self-employed was announced way back in 2013.

Though little has been said since the announcement, it is expected to kick in ‘early 2017’.

We wrote this quick guide to help you work out if you are eligible, and how you can apply!

What is it?

The Tax-Free Childcare scheme is an online account parents pay into much like any other online bank account.

The government also pays into this account to help support your child-care costs.

Unlike Employer Supported Childcare, Tax-free childcare accommodates contractors and the self-employed.

How does it work?

  • Open an online account through gov.uk – click here to receive updates
  • For every 80p the parents pay into the account, the government will pay 20p – much like the current tax rate.
  • This is limited to £2,000 per child per year up to the age of 12
  • For parents with disabled children, this doubles to £4,000 per child per year, up to the age of 17
  • The account is flexible so you are able to pay in or pay out as much as you like, whenever you like -perfect for expensive childcare in the summer
  • Other family members or an employer can also contribute

Can I apply?

  • Parents must work with each earning at least £115 a week but no more than £100,000 a year
  • For the newly self-employed, there is a 12 month ‘start-up period’ where you do not have to earn within the threshold
  • You must be registered with HMRC for self-assessment in order to provide your unique taxpayer reference number
  • You must reconfirm your current situation every 3 months through a simple form on your account page
  • Your children can be no older than 12, or 17 for children with disabilities
  • You cannot use other childcare schemes like Childcare Vouchers

I’m an employer, how does this affect me?

This will not effect you as an employer as the Tax-Free Childcare scheme is based solely on the parents.

Employer Supported Childcare will still be available as parents do not need to switch to the new scheme, so you will still need to offer this.

Employers are able to pay into the account along with the parents if this is a service you wish to include in your business.

Tax-Free Childcare For Contractors

This is expected to role out in spring 2017 however youngest children will be the first in line.

By the end of 2017, the scheme will be available to all eligible parents.

Click here for more information and here for more a more detailed Q&A with HMRC.

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