“Delivering Tax-Free Childcare”

Tuesday 18th March 2014 Written Statements

[The Economic Secretary to the Treasury (Nicky Morgan)]

The Government have today published “Delivering Tax-Free Childcare: the Government’s response to the consultation on design and operation”—a response to the August 2013 consultation on tax-free childcare. The document is available at: www.gov.uk/government/consultations/tax-free-childcare and copies have been deposited in the Libraries of both Houses.

Tax-free childcare is designed to provide support directly to working parents for their childcare costs. The Government will pay 20p for every 80p working parents pay towards their childcare costs up to a maximum of £10,000 per year.

“Delivering Tax-Free Childcare” announces that all working families with children under 12 will be able to access the scheme within the first year of its opening, as opposed to a gradual expansion over a seven-year period.

“Delivering Tax-Free Childcare” also announces an increase in the cost cap from £6,000 a year to £10,000 per year, which will mean the Government contribution could be worth up to £2,000 per child each year. This means that around 100,000 parents with higher childcare costs can benefit from greater support.

Delivered by HM Revenue and Customs (HMRC) with its delivery partner National Savings & Investments (NS&I), the scheme will be will be simple, flexible and straightforward for parents and childcare providers; parents’ money will be secure; and they will face no fees or charges.

Employers’ workplace nurseries will not be affected by the introduction of TFC and parents who currently receive employer-supported childcare (ESC) can continue to benefit from this scheme with their current employer should they wish to do so. Self-employed parents and those working for employers who do not offer the existing scheme, employer-supported childcare (ESC), will have access to childcare support for the first time.

The Government announced at Budget 2013 that they are allocating a further £200 million per year to increase the childcare support available under universal credit for families where both parents, or a single parent, pay income tax. The Government are now going further and today announce they will raise the proportion to 85% for everyone in universal credit. In line with the principles of the welfare cap, offsetting savings to fund this expansion will be found from within the universal credit programme. Further details will be set out at autumn statement.