Proposed changes to childcare support

In the 2013 Budget the government announced its intention to change the way child care support is provided.

The proposal will see the current salary sacrifice scheme of employer supported childcare being phased out when the new scheme is introduced.

Under the proposals parents will be able to claim back up to £1,200 per year in childcare costs provided they meet the following criteria:

• Both parents are in work
• Neither parent earns over £150,000
• Not receiving credit through the childcare element of the Working Tax Credit

The above applies whether the individual is either employed or self employed even if they are only on the minimum wage.

The scheme works by allowing parents to claim back 20% of their childcare costs (subject to a maximum of £1,200 per child) per year. It is anticipated that the subsidy will be paid into accounts held by registered childcare providers.

The scheme is planned to take effect from Autumn 2015. At first it will only be available to children under the age of five (16 if the child is disabled) rising by one year each year until the age of 12.

As with the high income charge for child benefit, the new scheme has been criticised. Under the new rules a lone parent earning £151,000 or more cannot benefit from the scheme whereas a couple earning up to £300,000 can.

It is however important to remember that this is still in consultancy stage and therefore subject to change.

Lorraine Marley, Tax Consultant