A consultation seeking views on the UK Government's plans to introduce Tax-Free Childcare for working families, and additional assistance with childcare for parents through Universal Credit was launched last month. The closing date for response to the consultation is 14 October 2013.

At Budget 2013, the Government announced the introduction of Tax-Free Childcare for working families. Under the proposals it is intended that the Government will provide 20% of working families’ childcare costs, subject to an annual limit of £1,200 contribution from the Government for each child. This will be equivalent to basic rate tax relief of childcare costs up to £6,000 a year.

Under Tax-Free Childcare, parents will register with a voucher provider and open an online account. The Government will then ‘top up’ payments into this account at a rate of 20p for every 80p that families pay in, subject to the above limit. Households in which all parents work but do not receive support through tax credits (or Universal Credit) will be eligible for Tax-Free Childcare, so long as neither parent is an additional rate taxpayer.

Tax-Free Childcare will be delivered by HMRC. Employer-Supported Childcare will be phased out, though existing members of Employer-Supported Childcare will be able to choose whether to remain on their current scheme or move to Tax-Free Childcare. The initiative will be phased in from autumn 2015. From the first year of operation, all children up to age five – and disabled children under the age of 17 – will be eligible. The scheme will then build up over time to include children under 12.