What is this?

In July 2015 we shared with you the latest position regarding the proposed launch of Tax Free Childcare (TFC) which was confirmed as being delayed from “Autumn 2015” to “Early 2017”.

Since July the Chancellor announced in his Autumn Statement further changes to the rules for eligible participants in TFC.

1) A reduction in the upper earnings limit for eligible participants – Previously the scheme was to be open to all working parents in the UK provided they were either a basic or higher rate tax payer, only additional rate tax payers were excluded. However, the upper limit has now been reduced to £100,000. Therefore any family where either parent earns over £100,000 will no longer be able to take part in TFC.

2) An increase to the minimum hours requirement for eligible parents – Previously eligible parents had to both be working a minimum of eight hours a week to partake in the scheme. This has now been increased to sixteen hours per week for both parents. Likewise any family where either parent is working less than 16 hours per week will no longer be eligible to partake in the scheme.

What does mean for employers?

With the launch date of Tax Free Childcare still remaining in “early 2017” you might say there is no imminent call to action. However, with both the changes clearly reducing the number of families that will be able to partake in the new scheme, families need to be clear on where they currently stand regarding eligibility. This is especially true as both these latest changes are based on both parents circumstances not just those of your employees.

House View

With a number of changes having already been made since the original details of the scheme were released, we can’t rule out further changes being made before 2017. Therefore in order for employees to avoid being cut out of both schemes, employees should be looking at their circumstances now and where applicable, join a Childcare Voucher scheme to give themselves a back-up option. This applies to both those who are already ineligible for Tax Free Childcare, as well as those families who aren’t sure whether they will be eligible or not by the time TFC launches.