This government is providing more help with the cost of childcare to working parents than ever before. As well as introducing Tax-Free Childcare in April 2017, the government has doubled the free childcare available to working parents of 3 and 4 year olds in England to 30 hours a week, and increased the support available through Universal Credit to cover up to 85% of childcare costs. In 2019/20 the government will spend around £6 billion on childcare support – a record amount.
Since opening the Childcare Choices service through which parents apply for 30 hours free childcare and Tax-Free Childcare more than 370,000 customers have successfully applied and are now using the service. Of these, more than 335,000 parents are eligible for 30 hours free childcare. Over 210,000 have a Tax-Free Childcare account. The government will encourage more parents to take up the offer they are entitled to.
Parents can apply via the Childcare Choices service for both 30 hours free childcare and Tax-Free Childcare. The application is straightforward and can be accessed via: https://www.childcarechoices.gov.uk/.
Tax-Free Childcare is a fairer and better targeted system than childcare vouchers. Through Tax-Free Childcare all families who are eligible can get support regardless of who their employer is, or whether they are self-employed, and support is based on the number of children in a family, rather than the number of parents. Tax-Free Childcare is targeted at a similar income population as childcare vouchers but will provide support to nearly 1 million more families compared to the number currently using vouchers.
The decision to phase out childcare vouchers and directly contracted childcare, and replace this support with Tax-Free Childcare was made in 2013, and received parliamentary approval through the Childcare Payments Act 2014.
Today the government has made The Income Tax (Limited Exemptions for Qualifying Childcare Vouchers and other Childcare) (Relevant Day) Regulations 2018 (SI 2018/462). These Regulations set 4th October 2018 as the date when childcare vouchers and directly contracted childcare, part of Employer Supported Childcare, will close to new entrants. After that date, parents who are already using vouchers can continue to do so for as long as they remain with their employer, and their employer continues to offer the scheme.
To reflect concerns about the timing of the closure of childcare vouchers and the transition to Tax-Free Childcare, the government has decided to keep childcare vouchers open for a further six months until October. This will allow more time for Tax-Free Childcare to bed in, for awareness to increase and for families to understand the support they can receive under the scheme. Now that Tax-Free Childcare is fully rolled out, the government will keep it under review to ensure it is delivering the support needed for working families.
This statement has also been made in the House of Lords: