Legal News

The government has announced a £2,000 tax break for working parents earning up to £300,000 annually.

The government’s new childcare tax break would entitle working parents to £2,000 of tax-free childcare annually. The government says that many parents are “running to stand still” financially – and some parents have to make the decision between working and remaining at home to care for their children if they do not have access to affordable childcare. Recent research by the Family and Childcare Trust has shown that for some parents the cost of childcare is higher than their monthly mortgage repayments.

Chancellor George Osborne has said that the government’s financial measures to tackle the economic deficit has helped families by keeping interest rates and mortgage repayments low.

The current voucher system to help parents with childcare has to be taken up by employers, however, and currently just 5% of employers have signed up to it, leaving many parents struggling to make ends meet and balance work-life choices, including budgeting for childcare. Just one million families benefit from the current voucher scheme for childcare.

The £2,000 childcare tax break is higher than the figure of £1,200 suggested last year to help “hard working families”. The childcare entitlement will also apply to children up to the age of 12, rather than the age of seven proposed last year. The scheme covers up to 20% of childcare costs up to a total of £10,000 per year. The new childcare tax break will only apply to households in which both parents work, however.

The fact that the childcare tax entitlement will also apply to couples with a joint income up to £300,000 has also provoked a backlash from some critics of the scheme – however, the government is also providing an extra £50 million for nursery places for children aged three and four from low-income families living in economically deprived areas.

Deputy Prime Minister Nick Clegg also said that parents on Universal Credit could in effect have 85% of their childcare costs met as a result of the scheme.

The government is keen to encourage out-of-work benefit claimants back into work – some claimants have claimed that the prohibitive cost of childcare has forced them to stay at home on benefits rather than returning to work. All benefit claimants are currently being transferred to a single Universal Credit benefit payment rather than claiming up to six different types of benefit, including Jobseeker’s Allowance and Income Support.

Mr Clegg said of the new childcare scheme:

“If you have two children and you have to pay their childcare costs, then it’s worth up to £4,000 to you.”

The Labour Shadow Minister for Children Lucy Powell has responded to the announcement by saying the childcare scheme is “too little, too late”. Ms Powell said that the government had cut £15 billion-worth of support for families and children since it came to power in 2010.

“This government has done nothing in this Parliament to help parents experiencing a cost-of-living crisis,” said Ms Powell.

However, up to two million families are expected to benefit from the £2,000 childcare tax break.

Duncan Lewis Childcare Solicitors

Duncan Lewis childcare solicitors can advise families on a wide range of childcare issues, including care proceedings and children taken into Local Authority care – as well as child contact and residence, parental child abduction and child abuse.

Duncan Lewis childcare solicitors are also a leading provider of Legal Aid services – and can advise on childcare law under UK law or Islamic law.

For expert legal advice on all childcare matters, contact Duncan Lewis childcare solicitors on 020 7923 4020.