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Tax-Free Childcare

25 April 2014 by Crystal HR & Payroll Ltd

 The government is introducing Tax-Free Childcare (TFC) to support working families.

The new scheme will be introduced in autumn 2015, and extends help with childcare costs to significantly more families, supporting parents in the decision to return to the workplace or increase their working hours.

Tax-Free Childcare is not reliant on the employer being involved and there will be no mandatory employer role within this new scheme. However, employers can play a role if they wish to do so. And from responses received during last year’s consultation, it was clear that many employees would like their employers to play a role – and many employers want to do so.

The Government’s consultation response at sets out the next steps, and in Chapter 4 makes some suggestions on how employers may wish to participate in the new scheme.

The existing scheme, Employer-Supported Childcare (ESC; childcare vouchers and directly contracted childcare) will remain available to employees who are already members of their employer’s scheme when Tax-Free childcare is introduced for as long as they remain with their employer, and for as long as their employer continues to offer the scheme.

Alternatively, they may wish to move to Tax-Free Childcare – but they will not be able to be in receipt of support through both schemes at once. There will be help and advice so parents can understand the benefits of each scheme.

ESC will be closed to new members when Tax-Free Childcare is introduced in autumn 2015. Workplace nurseries will not be affected by the changes.

ESC is part-funded by a National Insurance Contributions disregard for employers. Such arrangements will not be available in Tax-Free Childcare. This will ensure that the extra funding made available for Tax-Free Childcare will maximise support for working families with their childcare costs.

The new scheme will be run by HMRC, in partnership with NS&I.

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