TAX FREE CHILDCARE PLAN

Tax Free Childcare Plan Firmed Up In Budget
The government seems to have firmed up its timetable for introducing its long-awaited ‘Tax Free Childcare’ scheme. The idea, which has been on the table since 2013, is for parents to be able to claim back 20% of what they spend on childcare, up to a certain limit. This will have the effect of refunding the tax they paid on the money used for childcare costs. Originally, Tax Free Childcare was expected to be introduced last year, but despite wide support, delays and problems have led to it being pushed back to 2017 at the earliest.
At Prime Minister’s Questions in early March, the Labour leader Jeremy Corbyn challenged the Prime Minister on the issue. Pointing out that it had been announced three years previously, he asked what the hold-up was. The Prime Minister replied that the government had lost a court case, which had caused a delay. In fact the government ultimately won the court case in question, but the Supreme Court had placed a suspension on developing the scheme for the duration of the litigation. This meant that key steps towards delivery could not be taken until July 2015 when the result was announced.
In his Budget Speech, the Chancellor George Osborne announced that the Tax Free Childcare scheme would be going ahead from early 2017. Notably however it will not be rolled out to all parents at once, with those who have younger children being prioritised. Ahead of this, all childcare providers wishing to offer the scheme will need to be signed up to a computer system that will handle the payments. It is not known whether the development of this system is complete yet. Given how important reliable cash flow is, particularly to childcarers working on their own or with only a few others, it will be absolutely essential that it works properly from the very start.
Tax Free Childcare is one of the pillars of the government’s childcare reforms, which along with doubled free hours, it hopes will significantly reduce the costs burden on parents.