Parents can reclaim up to £1,200 under new childcare scheme
The Government is launching a brand new system to help parents with childcare costs, but is it any better than the current one?
Working parents will be able to claim back up to £1,200, or 20%, of childcare costs per child, under new Government plans.
The ‘Tax-Free Childcare’ scheme, which will be phased in from autumn 2015, is expected to help around 2.5 million families.
It will initially be available for each child until they reach the age of five, later increasing up to the age of 12.
The Government has said £6,000 is the average annual price of childcare, which is where the £1,200 figure has come from.
Prime Minister David Cameron said: “This is a boost direct to the pockets of hard-working families in what will be one of the biggest measures ever introduced to help parents with childcare costs.”
Support for parents
The new scheme will be available to families where both parents are working, each earning less than £150,000 per year, and not already receiving Tax Credits.
It will be availalbe to more people than the current Employer Supported Childcare (ESC) scheme, which around 5% of companies use. And it will be also be open to self-employed people, which is the current system is not.
The new system is being introduced to try and help UK parents who are currently paying some of the highest childcare costs in the world, although families where only one parents works will not be able to qualify.
The funding for it will partly come from gradually phasing out ESC and partly from other sources, which have not been named yet.
"The rising cost of childcare is one of the biggest challenges parents face and it means many mums and dads simply can’t afford to work. This not only hurts them financially, but is bad for the economy too," said Deputy Prime Minister Nick Clegg.
What’s changing?
The current ESC scheme now pays working parents up to £55 a week, which is deducted from their salary before tax. This works out at a saving of around £900 a year but it is only available when an employer has signed up to the scheme, whereas the new system is open to all eligible parents.
Parents using this system will be able to continue doing so but after 2015 it will be shut for new claimants.
Working Tax Credits are also available to lower-income families where each parent works 16 hours or more. These can pay for up to 70% of childcare costs up to a weekly cap of £175 for one child and £300 for two or more.
Will parents be better off?
Overall, the new plans have been welcomed by consumer groups and Anne Longfield, Chief Executive of 4Children, says any increase in the support available for meeting the costs of childcare will be welcomed by parents.
But the scheme has been criticised as parents will have to wait two years to be able to benefit. With rising inflation, low wages and childcare costs rising by 5% a year, many argue it would have been more beneficial to launch earlier.
Longfield also points out that at the moment both parents can claim vouchers and under the new scheme it appears only one earner will be able to claim.
It also excludes families where there is only one parent in work and isn't available to workers earning less than £10,000 a year.
The proposals are set to be put out for consultation before being finalised.
More on childcare
Five ways to cut the cost of childcare
Is an au pair a good way to cut the cost of childcare?
Need some extra money? Become a mumpreneur
'Squeezed middle' will have no more money in 2020
How to claim your Tax Credits
Most Recent
Comments
-
I'm trying to find any part of my posts that relates to hate in any way.... I generally don't feel hatred towards those earning more than me - I too am well educated but chose a more 'vocational career' which was my choice. I guess I am probably a little jealous - it's hard to see the kind of money that gets frittered away by some simply on appearances when there is true poverty in the world. BUT my main issue with this is that at a time when the debt-ridden government is making necessary cutbacks which affect many people, why are they subsidising households earning nearly £300K - I truly don't believe they need it. If they have salaries of that scale then they have options to alter their lifestyle to cope with changes - low earners have no wiggle-room. (btw I truly believe it is important for people to earn varying amounts according to skills/experience/levels of responsibility/achievement etc to drive ambition but this seems to have become disproportionate & disconnected from actual value) I also never claimed that all the tax I pay covers everything, but in a time of economic tough times I would like to think that this money is being used for NECESSITIES for this country. eg I have no children but I think it is extremely important for investment in education, I am in good health but think the NHS is vital, many others areas such as police, fire, defence, justice, infrastructure, energy, railways, roads etc are essential for this country to thrive. Payments to rich parents are not.
REPORT This comment has been reported. -
So are you sure the tax YOU pay actually covers all You take out of the system i.e. does YOUR tax cover YOUR share of the cost to run the country (i.e. the total cost to run the country divided by the number of people). If you are on close to minimum wage then I suspect that the answer to that would be NO. Hence it may well be MY tax money that is going to subsidise YOU. So where does all this jealousy and hatred of others end, you earn more than me hence I hate you!!!!! Now I may not fully agree with the limits above but am getting somewhat sick of all this hatred/jealousy of people who earn more than someone else. These 'higher earners' have educated themselves and got decent jobs. The government has done a great job at deflecting the hatred from them to everyone else. Hence we spend so much time in fighting we do not actually attack the cause of the issue. So low wage earner point fingers at the high earners and high earners point fingers at the jobless etc. and it just goes on. Just because someone earns more does not mean they have an easy life and will not be struggling financially. We all make choices based on what we have coming in i.e. what size house to buy etc. If things change to that takes more money out of your take home pay then you can still struggle whether you earn £15k or £50k. A little more thought for other people and the problems they may have would go a long way instead of the scorn and hatred that seems to be prevalent.
REPORT This comment has been reported. -
@psm, I work out it is MY tax money because it is, just as it is everyone else's tax which is being wasted on this and a thousand other pea-brained schemes which the country can't afford. Far from it being my attitude to this that got the country into the mess where it can't afford the expenditure that it is already apparently committed to, it is YOUR attitude of 'give them more' and 'we should pay for other people to breed' that has got us into this mess. The sooner we stop paying people to do things that they should pay for themselves the sooner we will be out of this mess.
REPORT This comment has been reported.
Do you want to comment on this article? You need to be signed in for this feature
23 March 2013