Government announces new tax-free childcare scheme and promises to save families £2K a year

Ask any parent to outline their biggest parenting struggles and though they could probably reel off a whole list; sleepless nights, public tantrums, getting kids to brush their teeth…top of the pile is likely to be childcare.

The Government has been promising to do more to help working parents in this area for some time now and yesterday the Chancellor outlined their plans for this trickiest of parenting areas. In his budget speech Philip Hammond announced that two million households would be eligible for tax free childcare by the end of the year.

Working parents of three and four year olds would be entitled to the extension of free childcare hours from the current 15 to 30 hours, later this year. And that, along with a new in-work voucher scheme, could save families up to £5,000 a year.

Described by the Chancellor as “support for ordinary working families and women in the workplace” the new tax-free childcare will see eligible families get 20 per cent of annual childcare costs paid for by the Government.

The scheme could see a £2,000 saving per child under 12-years-old each year, or up to £4,000 in savings for the families of disabled children up to the age of 17.

To qualify, parents will have to work 16 or more hours a week, and each earn at least £115 a week, but not more than £100,000 each.

All sounds great, in theory, but some nursery workers have expressed concerns about the proposals warning the Chancellor that his promise of 30 hours free childcare will be unachievable unless it is funded properly.

Some experts within the childcare sector have accused the government of underfunding the free hours and forcing nurseries to find extra cash, usually by increasing the fees for additional hours.

“It’s incredibly disappointing that the chancellor’s brief reference to childcare in today’s budget included no mention of the critical issue of early-years funding,” Neil Leitch, chief executive of the Pre-school Learning Alliance told The Times.

He also expressed concerns that more childcare providers would look to limit the number of places they offered for the free hours or, in some cases, pull out of the scheme altogether.

“It’s looking increasingly likely that many parents expecting to benefit in September will be left disappointed,” he continued.

While some parents will no doubt welcome the new scheme others have accused the Government of not taking the plans far enough. Because even with the free help, the cost of a part-time nursery place does not come cheap.

According to the Family and Childcare Trust families now have to fork out £116 per week which adds up to a whopping £6,032 a year for a part-time nursery place (25 hours a week).

And in London that cost is even higher, with families paying a massive £154 per week – a third more than the national average.

So will the new plans actually benefit parents?

Jonathan Watts-Lay, Director at WEALTH at work believes whether parents are better off with the new scheme depends on factors such as how much they earn, how much they spend on qualifying childcare, whether both parents work, how old their children are, and how many children they have.

“Tax Free Childcare will only be available to parents with children up to the age of 12 (17 if disabled), whereas the current Childcare Voucher system is available to children up to the age of 15 (16 if disabled); so those with older children could lose out,” he said.

“There will also be no National Insurance (NI) saving under the Tax Free Childcare system; therefore employed parents with lower childcare costs could be worse off,” he continues.

“Unlike the current Childcare Voucher system, Tax Free Childcare does not rely on employers offering the scheme to parents. This is good news for those who work for companies that don’t offer the childcare voucher system and the self-employed.”

What do you think of the new plans? Will they benefit you? Let us know @YahooStyleUK

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