Tax-Free Childcare to present complex array of choices

The Government announced today that the new Tax-Free Childcare (TFC) scheme, originally due to start in Autumn 2015, will roll out in early 2017. Parents of the youngest children will enter the scheme first and it will be open to all eligible parents by the end of 2017. The Government also confirmed today that the existing scheme, Employer-Supported Childcare, will close to new entrants from April 2018.

The TFC scheme will operate through online accounts and for every 80 pence paid in, the Government will add 20 pence up to a maximum of £500 (£1,000 for disabled children) per child for each three month entitlement period.

LITRG Chairman, Anthony Thomas, said:

“Since the scheme was first announced, LITRG have raised many concerns about the interaction between TFC and other childcare schemes. People will face extremely complex and difficult financial decisions about whether to join the new TFC scheme or stay in existing schemes including childcare vouchers, tax credits and universal credit.

“It is crucial that the Government ensure that detailed guidance is published over the next few months ahead of the commencement of the scheme and that potential users are given support to help them make the right choice. For the most complex situations, a telephone advice line should be provided with trained advisers who can guide people through the interactions. Funding should also be made available for the voluntary sector to support people with these difficult choices.”

Notes for editors

Low Incomes Tax Reform Group

The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) 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.

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. The CIOT’s 17,600 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.