Being a parent and working full-time can be difficult, and this is especially true for the self-employed. Due to the differing levels of support provided for small business owners, contractors, and freelancers, you can find yourself left with too much on your plate.
However, in April 2017, the government rolled out the new Tax-Free Childcare initiative which greatly benefits the self-employed.
What is tax-free childcare initiative?
The tax-free childcare scheme is a initiative that allows parents to have their childcare costs topped up by 20% by the government. The initiative is per child, and has a limit of £2,000 (£4,000 if your child is disabled).
To qualify for the initiative, both parents need to be working at least 16 hours a week in addition to be earning the National Living Wage, which is currently £120 per week. Furthermore, tax-free childcare is unavailable to anyone who is claiming tax credits or universal credit. Finally, if either parents earns more than £100,000 per year, both parents are disqualified from the scheme.
What is the difference between Childcare Voucher & Tax-Free Childcare?
The tax-free childcare scheme was launched in April 2017 by the HMRC. The initiative is eventually planned to phase out the Childcare Voucher programme which the final applications for have recently been extended to October 2018.
Childcare Vouchers were distributed by the employer which meant that the self-employed were excluded from receiving additional support for their child.
However, the tax-free childcare scheme also pay per child, rather than by parent – which is how childcare vouchers are distributed.
How does tax-free childcare work?
Parents need to set up an account with HMRC in which they can pay into as they please. The money in this account can be used for childcare at anytime, baring in mind the childcare provider must be registered with this initiative.
If the account holder withdraws money from the account at any time for anything but childcare, the government’s contribution is withdrawn.
How can Nixon Williams help?
As your accounting partner, we understand the unique demands which come with your lifestyle. That’s why we’re always on hand to offer support with all things finance.
To speak to a member of our team, simply call 01253 843180 or email firstname.lastname@example.org.