The introduction of the Tax-Free Childcare in the United Kingdom came as a relief to many. Many believed it would benefit those who do not qualify for a Child Voucher scheme. Then how is it that only a paltry 20% of those eligible for the scheme are claiming from it? That is to say, out of the available 1.6 million families, about 315,000 are members. In this article, we will explore what this scheme is all about.
What is the Tax-free Childcare scheme?
It is a government project that helps cost-share the financial burden of childcare with parents. The scheme is voluntary and does not mandate your employer to register you without your consent. Basically, the government pays at least 20% of the cost that you pay for your child’s care. But the maximum that the UK government can give is GBP 2,000 per child in a year.
Who is eligible?
The Tax-Free Childcare scheme is not available for those who are already on other running programs. The alternative programs are Working Tax Credit, Child Tax Credit, or Universal Credit and Childcare Vouchers. If you are a member of these, then you cannot apply for the Tax-Free Childcare Scheme. There are some requirements that you must have to be eligible.
- Parents should be working. If it is a single parent, then he or she should be working. The employment type should be either an institution employee, self-employed, or a minimum wage citizen.
- The combined earnings of both parents should be GBP 115 weekly. Similarly, neither of the two parents should earn over GBP 100,000 annually.
- As a parent, you must be a UK citizen, from the EU or European Economic Area. If the parent is outside this bracket, he or she must get an exemption to access the funds.
- The child should be at least 11 years or younger. The age bracket is up to 17 years if the child has a disability and lives with you.
- In case the parents are separated, only one can apply for eligibility. Mostly, it is the one who lives with the child. The government agency responsible for vetting will decide who gets the scheme account if you both apply.
- Prisoners and parents who are or are intending to be absent from home for over six months are not eligible.
How does it work?
The Tax-Free Childcare scheme provides a percentage of the total cost of your childcare expenditure. You can use the money to pay them over 68,000 childcare providers registered across the UK. The scheme covers all the standard child provisions like breakfast clubs, nannies, and playgroups. You can also use the funds on the summer holiday camps and activities for your child. There are some steps to follow before you start claiming the Tax-Free Childcare scheme funds.
- Open up an online account.
This is a simple step that you will do on the government online portal at GOV.UK. Once the account is active, you can deposit your cash. The government will match your deposit by topping up with a certain percentage. For instance, if deposit GBP 80, the government will add on GBP 20 the same day to make it 100. This amount will be available for only one child. If you have several children eligible, then you have to open other accounts for them. Each child will get a reference identity number. The childcare providers will get their payment through this account.
- Know the available amount
The maximum amount you can claim from the account is GBP 10,000 annually per child. That is equivalent to GBP 2,000 from the government. If the child has a disability, you will claim a maximum of GBP 4,000 from the government contribution. The Tax-Free Childcare scheme is available to parents even if you are on unpaid, maternity, or paternity leaves.
Once these steps are over, you can start enjoying the benefits. Remember, the parent or any person with interest can deposit cash into the account. The processing of the cash payment is after every three months. You can do this online through your account. When you wish to, you can withdraw your deposits at will. Similarly, the government will withdraw its contribution.
Why are families not registering for the scheme?
With a scheme that helps alleviate the burden of childcare from the parents, why are people not registering? There are two primary reasons as to why the uptake is low. First is the bureaucracy within the government system. The program first took off in April 2017. However, the complete rollout stagnated due to technical hitches. The delay caused suspicion and apathy on the part of parents. Since the other childcare programs were still working, more parents stayed back.
The other reason that the UK government is advancing for the lack of enrolment is poor civic education. The delay that came by the technical delays made people lose interest in the program. Anything that starts with a problem from the government is usually suspect. Others still say that the government is not providing any better alternative to the existing schemes. Giving various opinions, a majority of people still shun the system.
With such a reasonable effort from the UK government, it is appalling that most eligible citizens do not want the scheme. Whether it is the technical delays or poor civic education, the UK Tax-Free Childcare scheme is good. Now that the bureaucracy red tapes are out, the government is on the right track. With a little strive in civic education; the benefits of the scheme will make the citizens sign up. We hope that you are now knowledgeable on the UK’s Tax-Free Childcare scheme works.