Good news for parents as Chancellor announces boost to childcare support

The Low Incomes Tax Reform Group (LITRG) has welcomed the announcement in the Chancellor’s Budget today that all those entitled to claim childcare support through universal credit will be able to claim 85% of their eligible costs instead of 70% as originally planned. The former proposal that would have restricted 85% support to parents where at least one of them paid income tax has been abandoned.

This came as part of the announcement ahead of today’s Budget outlining the new tax-free childcare relief, whereby from Autumn 2015 eligible parents will get the equivalent of 20% basic rate tax relief on their childcare costs worth up to £2,000 a year per child. Within the first twelve months, parents of children under 12 are expected to qualify, and under 17 where the child is disabled.

Commenting on the Budget announcement today, LITRG Chairman Anthony Thomas said:

“This is really good news. The former proposal would have been not only totally unfair, giving more to those who already had more, but unworkable. It would have been impossible to work out who was entitled to claim childcare at the higher 85% rate if eligibility had depended on whether or not the claimant was liable for tax. This is because a person’s final tax liability for a year cannot be determined until after the year is ended.

“Besides, with the Government raising the personal allowance year by year, it would have made no sense at all to penalise those low-income individuals who had just been taken out of tax by depriving them of the ability to claim universal credit on their childcare costs at the higher rate.”

“This is very positive news for parents on low incomes and we will be publishing information about the impact the support is likely to have in the coming weeks.”

Other features of the revised proposals that LITRG welcome are:

·         The assurance that while the system will work by means of online accounts, help will be given to those who cannot get online;

·         The fact that there will be one provider, NS&I, which will make it easier to control the extent to which commercial advertising of their products by different providers can mislead participants;

·         The decision to fix entitlement to tax-free childcare for three-monthly periods, rather than allow it to fluctuate with changes in circumstances as in tax credits. It is important to avoid the difficulties caused to claimants by constantly changing entitlement, with resulting overpayments and underpayments.  



Notes to editors:


1.       The Low Incomes Tax Reform Group (LITRG)

LITRG is an initiative of the Chartered Institute of Taxation to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

2.       The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.