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Help with cost for under 5

Read this leaflet about all the help for childcare cost

As well as 15 hours free childcare for pre-school children, the Queen's speech, in June 2015, included plans for a new scheme to help working parents with their childcare costs.

This new scheme, called Tax-free Childcare (TFC), is scheduled to be launched in autumn 2015 and will work differently for parents to the existing childcare voucher scheme. At present, it looks like TFC is due to be run by the Government, through HMRC and National Savings & Investments.

How is TFC different to the current scheme?

TFC has much more complex eligibility requirements:

  • Both parents in a two-parent family have to be in work to be eligible for TFC, each earning less than £150,000 a year and not receiving the childcare element of Universal Credit.
  • TFC is also open to self-employed parents, whereas the current scheme is not.
  • TFC will only be available for children under 5 initially or under 17 for children with disabilities, extending to all children under 12 within the first year (the current scheme is open to children aged under 16, or 17 if registered disabled).
Another key difference is how parents pay in to the scheme:
  • The current scheme works as a salary sacrifice deduction, so parents save tax and NI on their childcare vouchers. Under TFC, they will pay directly into TFC from their bank account (the employer is not involved).
  • However, for every 80p they pay in, the Government will top up 20p, up to a maximum £2,000 per child, per year.
This means that there will be many parents who are not eligible to join TFC or who would be better off staying with their employer's childcare voucher scheme.