Tax-free childcare plans ‘will benefit low-income families'

Plans published by the Treasury to create “tax-free childcare” will allow low-income families where both parents, or a single parent, are in work, qualify for tax credits or Universal Credit and earn above the £10,000 income tax threshold to claim government funding towards childcare costs.

The Treasury is proposing that this group should receive 85 per cent of childcare costs – an increase of 15 per cent up from the current 70 per cent rate.

Policy Exchange education research fellow Harriet Waldegrave said this would make a big difference to low-income families.

“To a parent, it’s the difference of contributing 30 per cent now to 15 per cent [in the future] – basically halving your parental contribution. That’s a big deal for those parents,” said Waldegrave.

“It’s a really important move when looking at working incentives and it acknowledges that the cut the government made two years ago [from 80 per cent to 70 per cent] has probably had a negative impact for people on lower incomes.

“Support for low-income parents is important because they are more likely to have to choose childcare based on cost, rather than quality – we need to help them choose the kind of childcare that will benefit their children.”