HMRC are opening a new childcare scheme from April 2017. For many people it will be better to stay on the existing childcare scheme. However self employed (sole traders and partners) are ineligible for the exiting scheme but will be able to join the new childcare scheme.
Families with the youngest children will be able apply to join the new scheme first. The scheme involves families paying in to a fund, which the government adds 20p for every 80p contributed. The fund is then used to pay for childcare. This is the equivalent of giving basic rate tax relief on childcare costs. HMRC have published a useful summary for parents and a further summary for childcare providers about the new scheme.
For some directors and employees this is not as generous as the current tax free childcare vouchers as those avoid national insurance as well as tax. However the new scheme will be available to self employed, which the current scheme is not.
TAX TIP: If you are part of the current scheme (Employer supported childcare), or join at any time up to the closing date in April 2018, you can remain in that more generous scheme.
As with all of our tax tips and web pages this information is necessarily summarised and of a general nature. If you would like detailed specific advice please contact us