The Tax-Free Childcare Scheme (TFCS) was launched in April 2017 and opened to all remaining eligible families with children under 12 on 14 February 2018. The new scheme allows working parents to receive a government top-up on their contributions. For every 80p in the £1 contributed by parents an additional 20p or 20% will be funded by Government up to a maximum total of £10,000 per child per year.
In tandem with the introduction of the TFCS the government had announced the closure of the existing childcare voucher scheme to new entrants from 5 April 2018. However, it was announced by the Education Secretary, Damian Hinds, during a recent Commons debate that the closure of the scheme to new entrants would be delayed for at least 6 months. This decision was made partly in response to the 119,000 parents that signed a petition and the hundreds of MPs that expressed their desire for the Childcare Voucher scheme to be kept open. There have also been many technical issues with parents signing up for TFCS which the government needs to address.
Parents that are registered to use employer-supported childcare will be able to continue using their existing arrangements for as long as their employer offers the scheme. However, employees will not be able to receive childcare vouchers if they start using the new TFCS.
Planning note
For some high earners and those with older children, the existing childcare voucher scheme can be more beneficial.
Restrictions on tax relief for top rate and higher rate taxpayers were introduced for new joiners to the employer-supported childcare scheme on or after 6 April 2011.