New Childcare Tax Credit Scheme

New Childcare Tax Credit Scheme

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The government says it wants to expand a new childcare tax credit scheme to include parents who stay at home because they are full-time carers.

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A 12-week consultation on the scheme  is expected to start later.

Families with two working parents could claim up to £1,200 a year per child.

The expansion of the proposal to carers or those on maternity or paternity leave follows criticism that stay-at-home parents were being penalised.

The government says the overall scheme will help 2.5 million families, but Labour says there has been a cut in support since the coalition took power in 2010.

The UK has some of the highest childcare costs in the world, with many people with two or more children saying it does not make financial sense for both parents to work.

‘More choice’

Full details of the tax credit scheme will be set out following the consultation, but the new system is expected be phased in from autumn 2015, with children under five helped in the first year. It will then build up over time to include all children under the age of 12.

Families with two working parents on less than £150,000 each would be able to claim up to £1,200 a year per child.

Under the proposal, parents will be required to open an online voucher account with a voucher provider and have their payments topped up by the government.

For every 80p families pay in, the government will put in 20p, up to the annual limit of £1,200.

The vouchers will be valid for any Ofsted-regulated childcare in England and equivalent bodies in Scotland, Wales and Northern Ireland.

Half of the funding for the new scheme will come from the abolition of the previous system of employer-supported childcare vouchers – which is provided by only about 5% of employers – and in part by funding switched from elsewhere in Whitehall.

A separate scheme will provide funding for parents who claim universal credit. It will see the state cover up to 85% of their childcare costs, up from 70% at present.

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