If you’ve recently had your baby, you are probably still in a whirlwind of feeding, not sleeping, changing nappies and trying to keep on top of everything. You are also busy enjoying your baby. Returning to work is probably the last thing on your mind right now.
When I had my son I also moved house (just to add to the fun!) and as a result didn’t return to my job. Eighteen months went by before I started to think I would like to work again, albeit part time. Some friends living in areas around London and other cities had booked a nursery or childminder almost as soon as their baby was born due to the demand for places. I was fairly clueless but had a look around in my new locality and was fortunate enough to easily find a nice nursery. I was even more clueless as to what childcare actually cost. It came as something of a shock, so I was interested to find out what financial help was available.
My help came in the form of Childcare Vouchers from my new employer (click here see my last Essex Baby article to learn more). When my son turned three he became entitled to fifteen hours of free care each week too, which meant the cost fell further.
So far, so good. It’s my choice to work and the financial help means it’s worth my while. There are plans afoot though which mean things will be different for those of you who are going to have or have recently had a baby. The Government is now consulting about a proposed new scheme called Tax-free Childcare which is expected to start in Autumn 2015. Unlike childcare vouchers, parents will not have to rely on employers to offer the new scheme.
In summary, you will pay 80% of your childcare bill and the government will add the remaining 20%. Families will be able to save up to £1,200 per child, per year if they are a lone parent who works or in a household where both parents work. This will also apply to the self-employed and those on low incomes (which is a plus as these groups aren’t eligible for Childcare Vouchers). It will not include those who take the childcare element of working tax credits (now known as Universal Credit) who receive other financial help with childcare. The support will be given for childcare costs up to £6,000 per year. Anything over £6,000 will not be subsidised.
The proposed extra support is welcome. Many families either don’t know about the financial help currently available or their employer simply doesn’t offer Childcare Vouchers as it’s not a compulsory scheme. More families will get help under Tax-free Childcare, and it is the Government’s intention as part of their wider agenda to make work pay.
There are downsides too, though. If you have just one child, you could be worse off under Tax-free Childcare than you would be if two parents worked and used Childcare Vouchers (up to £1,200 vs £1,800 a year). If only one of you works, your family will get no help under Tax-free Childcare but could get Childcare Vouchers (up to £933 a year). Childcare Vouchers can be used for children throughout their school age (up to the age of 15/16) for things like after school clubs, breakfast clubs and holiday schemes. Tax-free childcare will only cover the costs for childcare up to the age of 5 initially, although it is planned to phase in support for children up to the September after they are 11. So, depending on when your child is born, you could lose out. If you are not planning to have any more than one child, you will be wise to join the Childcare Voucher scheme as soon as you start working again. If you are a mum who is not planning to return to work, but you have a partner who does work, make sure they join the Childcare Voucher scheme as soon as possible.
It is expected that the Childcare Voucher scheme will close to new joiners from October 2015 but will continue to be available to existing members for a set period after Tax-free Childcare is introduced. If you want to start making savings on future childcare now, or are not sure which scheme will give you the most support, it makes sense to plan ahead. If you and/or your partner are employed and join a Childcare Voucher scheme now, you will have the choice, come autumn 2015, to choose which of the two schemes will benefit you the most if your child is eligible to receive the new funding. Planning ahead to give yourself the choice could save you a few thousand pounds over five years. That’s got to be worth having.
Written by Stephanie Forrester, Busy Bees Benefits If you would like to find out more, please go to: www.busybeesbenefits.com
You can give you view on the Tax-free Childcare scheme here.