Tax Free Childcare Faces Uncertain Future

With 30 Hours never far from the headlines, tax free childcare has kept a lower profile. Despite the policy having originated five years or so ago, under the coalition government, legal troubles kept it from being rolled out until last year. By then, 30 Hours was what everyone was talking about and sign-ups to Tax Free Childcare have not been what the government hoped for; in fact the Department for Education has had to pay significant sums back to the Treasury.

It is strange in a way that Tax Free Childcare has not taken off. Even with the technical difficulties the website faced, the fact that parents can benefit from up to £2,000 a year top-ups on what they pay for childcare is something that you would expect to be popular. It is true that many parents prefer to stick with the familiar childcare vouchers scheme that Tax Free Childcare seeks to replace, but even this does not necessarily account for the scheme’s unpopularity.

One reason might be the name. Unlike countries like the US, most people in the UK do not have to keep track of how much tax they pay. VAT is included in the sale price of most goods, while PAYE means that unless you are self employed, your income tax and national insurance is simply deducted from your pay every month without you having to think about it. The reaction to the name “Tax Free Childcare” may very well be “what tax?”

In any case, the fact remains that something needs to be done about Tax Free Childcare. The government has started pushing for more people to sign up to the scheme and it remains to be seen how successful that campaign will be. Labour, meanwhile, have simply stated that should they form a government, they will abolish the scheme and return to childcare vouchers.

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