The UK Government is consulting on the issue of Tax Free Childcare, which they propose to introduce as a policy is to help ease the burden that many working parents face when it comes to childcare.
The proposal is for the Government to provide 20% of working families’ childcare costs, subject to an annual limit of £1,200 contribution from the Government for each child. This is equivalent to basic rate tax relief of childcare costs of up to £6,000 a year.
To be eligible lone parents or couples have to each earn enough to pay income tax.
Those households in which both parents work, but are not eligible for tax credits, will receive the support, however, if one or both parents are higher rate taxpayers earning more than £150,000 they will not receive assistance.
The policy will replace the Employer Supported Working scheme currently in operation, which will be phased out, however, those who wish to remain with their current support will be allowed to do so. The Government says that the support will be available to around 2.5m working families.
Those on the lowest incomes will still receive Childcare Tax Credits under Universal Credit, which the Government intends to increase from 70% to 85% of costs by 2016 for lone parents and families who each earn enough to pay Income Tax.
Critics say that the measure will punish those families where one parent chooses to stay at home.
The consultation, which closes on October 14, can be accessed here on the UK Government website.
Source: UK Government