Chancellor George Osbourne delivered his Budget 2015 on 8 July, but where does it leave YOU?
With the help of Iain McMath, CEO of Sodexo Benefits and Rewards Services, we've debunked how new Tax-Free Childcare scheme will affect you and your family - plus we tell you whether you're better or worse off than you were before...
What is Tax-Free Childcare?
Tax-Free Childcare (TFC) is a new government initiative which is due to replace the existing Childcare Voucher Scheme in early 2017. If your family is eligible, Tax-Free Childcare offers to cover 20% of childcare costs (up to £2,000 per child, per year), for children up to the age of 12.
The current system, Childcare Vouchers, currently helps around 400,000 working parents save up to £933 of tax and NI on their childcare costs per year. This can reach up to £1,866 per family if both parents take vouchers. Based on a survey of 600 parents, conducted by Sodexo, this value covers an average of 54% of a family's childcare costs for children up to the age of 15.
How will this affect my family?
Depending on your family dynamic, the new childcare scheme could affect you in different ways. We've outlined whether you'll be better or worse off, below.
Families with a combined earnings of £60k
You could be up to £180 better off each year, thanks to the 20% saving of childcare costs (up to £2,000 per child, per year). Not everyone is entitled, only households with two working parents and children under the age of 12 will be eligable.
If you're a working mum, the new National Living Wage means you'll see an increase in the amount they take home if you're paid by the hour, although this still may not be high enough to balance the increasing cost of childcare. Some parents will be better off staying at home than going out to work and funding childcare, even with the new 20% saving they'll make if eligable for TFC.
Families with a combined earnings of £20k
Low income families are among the hardest hit by the Budget 2015. The cuts to tax credits and benefits caps could see families whose household earnings are £20,000 a year could be up to £2,094 worse off.
Research from Sodexo's online calculator shows that the majority of working parents (66%) would receive more support under the current Vouchers system, with just a third being more suited to TFC,
based on data collected from over 5,000 respondents.
If you're already part of the Childcare Vouchers scheme, you'll still be able to get them until your child turns 15, and if you haven't already been enrolled on the scheme, you have until autumn to do so, so get moving!