Watch Out for Childcare Tax Trap Warns Tax Expert

2 mins
Child at play

Help with Childcare costs

UK tax expert David Redfern today warned parents that the new Tax-Free Childcare scheme, which comes into operation at the start of the new tax year on 6th April could leave parents worse off than the previous childcare voucher scheme. Highlighting warnings which have suggested that the scheme will be of a greater benefit to higher-earning parents, tax preparation specialist and founder of DSR Tax Refunds Redfern urged parents to make sure they understand their options before making sweeping changes to the way they pay their childcare costs.

The Tax-Free Childcare scheme comes into force next month and will replace the childcare voucher scheme for new applicants. Under the new scheme, which requires parents to pay into a childcare account which is topped up by the government, parents could receive £2,000 per child to help towards childcare costs. Those who already receive childcare vouchers will be entitled to keep receiving them, as long as their employer continues to offer the scheme, but employers are under no obligation to continue to offer childcare vouchers. Those parents who seek help with childcare costs from 6th April will not be entitled to use the voucher scheme. It is estimated that over a quarter of a million parents may find themselves worse off under the new scheme. Redfern today urged parents to fully explore their childcare options. He stated that “the Tax-free Childcare Scheme is being promoted as a way to help more working parents with their childcare costs but the new scheme appears to favour higher earners and those with larger families… there’s a real risk that those earning less could be left worse off to the tune of hundreds of pounds each year”.

Redfern urged parents to make use of the HMRC Childcare Calculator to help them determine whether the Tax-Free Childcare scheme will leave them better or worse off. He added “it helps the whole economy when parents are able to work without being stung by unaffordable childcare costs and the government is right to attempt to address the situation, but working parents need to weigh up their options carefully – they might not be better off if they take part in the new scheme”. He added that the fact that the childcare voucher scheme would be closed to new entrants left the scheme open to accusations of inequity.

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DSR Tax Refunds are a firm of tax rebate specialists serving clients nationwide. DSR Tax Refunds are tax preparation experts who specialise in identifying potential allowable expenses for tax rebates for clients. Their specialist team can help employed and self-employed subcontractors with all relevant paperwork to ensure their claim is handled in an accurate and efficient manner.

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