Tax-Free Childcare: Scheme background

The new Tax-Free Childcare (TFC) scheme is being gradually rolled out from 21 April 2017. It will eventually replace employer-supported childcare (including childcare vouchers). This page explains how the scheme has developed to date.

March 2013 – The Government announced at Budget 2013 that they would introduce TFC for working families from autumn 2015 and increase the childcare support available under Universal Credit (UC) by £200 million. TFC would be administered by HMRC.

The Government stated that they introduced the new scheme because of the impact of childcare costs on people’s ability to enter work, remain in work or progress at work. They also felt the current employer-supported childcare (ESC) scheme was not effective because less than 5% of employers offered it. More than half of employed parents, and all self-employed parents, are unable to access to ESC support. ESC also has no regard to the number of children in childcare from each family, nor does it distinguish between single parents and couples.

See the Government’s announcement (March 2013) of the scheme.
August 2013 – A consultation document was published about the design and operation of the TFC scheme. As part of the consultation, the Government ran an online survey which received 35,000 responses from parents, childcare providers, employers and other stakeholders. The consultation also sought views on how the £200 million extra support for childcare in UC should be used. See our public consultations section for more information.

March 2014 – The Government published their response to the initial design consultation. The response set out how the scheme would work and also confirmed that the extra funding for UC would be used to increase support to 85% of childcare costs for all families eligible for UC, rather than only for families where parents pay income tax as originally proposed.
May 2014 – A consultation document sought views on provision of the childcare account. It considered various ways of delivering the scheme including delivery by HMRC themselves, National Savings and Investments (NS&I), one or more private sectors, or on the open market. You can find out more about this in the public consultations section.
June 2014 - Childcare Payments Bill published – this set out the framework for the TFC scheme. The Bill had its second reading on 14 July 2014. Ahead of the second reading of the Bill, a Commons Library research paper was published.
July 2014 - HMRC published a consultation on draft regulations for the Childcare Payments Bill. More detail about the consultation can be found in the public consultations section
.
July 2014 – The Government published their response to the childcare account provision consultation and confirmed that NS&I was their preferred choice for delivery of the TFC accounts. Alongside this various research reports were published.
October 2014 – The Childcare Payments Bill was considered by a Public Bill Committee in the House of Commons. Written and oral evidence was given by several organisations and voucher providers. Transcripts of the debates held between 14 October 2014 and 28 October 2014 can be found on the Parliament UK website.
October 2014 – HMRC published a consultation on the draft guidance for the scheme. More information about the consultation can be found in the public consultations section.

November 2014 – The Bill, as amended in Public Bill Committee, moved to report stage and third reading in the House of Commons before swiftly moving on to first reading in the House of Lords.
November 2014 – An impact assessment for the Childcare Payments Bill 2014 is published.
November 2014 – The High Court dismissed a challenge brought by one of the UK’s largest childcare voucher providers relating to the award of a public services contract to NS&I. See the full case on the BAILII website.
December 2014 – The Bill proceeded through committee, report and third reading stage in the House of Lords and received Royal Assent on 17 December 2014. You can find the Act in our legislation section.
January 2015 – The Government issued a response to the July 2014 consultation on draft regulations on eligibility and payments. Redrafted regulations were laid before Parliament, and final regulations were published in March 2015.
March 2015 – Two sets of amending regulations, relating to support for disabled children and interaction with tax credits claims, were also published in March 2015. You can find the regulations in our statutory instruments section.
July 2015 – The Government confirmed that the scheme would be delayed and would now launch in early 2017 rather than October 2015. This was as a result of a legal challenge, which went to the Supreme Court, brought by a group of childcare voucher providers. This group challenged the Government’s decision to deliver TFC accounts through a partnership between HMRC and National Savings & Investment (NSI). The Government’s announcement can be found on the GOV.UK website.
December 2015 – In his Autumn Statement, the Chancellor confirmed the upper earnings limit (previously £150,000) will reduce to £100,000 and both parents must be working the equivalent of 16 hours at the National Minimum Wage, doubled from 8 hours. See the Autumn Statement document on GOV.UK.
March 2016 – In the Spring Budget 2016, the Government confirm that TFC will roll-out early in 2017 and that the youngest children will enter the scheme first with all eligible parents brought in by the end of 2017. The existing scheme – employer supported childcare (including childcare vouchers) will remain open to new entrants until April 2018 to support the transition between the schemes. This will sit alongside doubling free childcare entitlement from 15 hours to 30 hours a week for working families with three and four year olds from September 2017. See GOV.UK for the Budget 2016 documents.
July 2016 – New regulations are issued that make technical amendments to the scheme that simplify the approach to late declarations, improve account restriction orders, add an additional circumstance that gives rise to a compensatory payment and provide for customers that are unable to assure their identity online. They also remove the requirement for parents to provide a child benefit number. Self-employed claimants will also be required to provide proof of their self-employed status when reconfirming their eligibility for the scheme. See our statutory instruments section.
September 2016 – A written statement is made by Chief Secretary to the Treasury that confirms HMRC will trial a new joint childcare service from late 2016. This will include TFC and the 30 hours extended entitlement for three and four year olds commencing in September 2017. The trial will involve 1500 parents, including some eligible for both schemes. The parents will be invited into the trial.
October 2016 – New regulations are issued that amend the earlier eligibility regulations to simplify the way the minimum income for eligibility is calculated, clarify rules for self-employed parents in start-up periods and require applications and their parents to have a national insurance number when applying to TFC. In addition the regulations clarify the rules around combining employment and self-employed income. A second set of regulations were also issued that amended some inadvertent wording in earlier regulations. See our statutory instruments section.
October 2016 – DWP publish guidance in relation to the treatment of capital in a TFC account for the purposes of Universal Credit. The guidance advises that where a person makes a claim for UC and has a TFC account, 80% of what is in the account will be taken into account as capital for the purposes of calculating entitlement to UC and the remaining 20 per cent will be ignored.
November 2016 – New regulations are introduced that bring into force various parts of the Childcare Payments Act 2014 for the purposes of a trial which will run for 6 months from 14^th November to 15^th May 2017.
November 2016 – New regulations are issued that cover rules on appeals for Great Britain and Northern Ireland. See our statutory instruments section.
April 2017 - DWP publish guidance in relation to the treatment of capital in a TFC account for the purposes of Housing Benefit. The guidance advises that where a person makes a claim for UC and has a TFC account, 80% of what is in the account will be taken into account as capital for the purposes of calculating entitlement to UC and the remaining 20 per cent will be ignored. HB Circular G4/2017 is available on GOV.UK.
April 2017 – HMRC publish an updated impact assessment for the TFC scheme which updates the original document published in November 2014. The impact assessment is available on GOV.UK
21 April 2017 – The TFC scheme launches for children under 4 on 31 August 2017. See the HMRC announcement on GOV.UK
April 2017 – Two new sets of regulations are published – one set brings into force various sections of the Main Act and contains transitional provisions in relation to employer supported childcare. The second set of regulations provide for additional circumstances in which a tax credit claim is to be treated as having been made up to 31 days before the date on which the claim was received by HMRC where a claimant opens a TFC account but does not pay any money out of the account and closes the childcare account and any other childcare accounts held. See our statutory instruments section.
July 2017 – Childcare Payments Act 2014 (Commencement No.4) Regulations 2017 (SI.No.750/2017) expand the scheme to those with children born on or after 1 April 2013 as well as those who are responsible for a disabled child (until the last day of the week in which the 1 September following their 16th Birthday falls).
August 2017 – New Chair of the Treasury Select Committee Nicky Morgan announced that she had written to HMRC’s Chief Executive about the online claim service for TFC. The letter asks for core performance data about the website. The letter was written after various websites and claimants reported having difficulties claiming TFC and 30 hour free childcare throught the online system.
November 2017 – Childcare Payments (Amendment Regulations) 2017 were introduced to make minor amendments to entitlement periods for certain couples and to clarify the situation where compensation payments may be due as a result of technical difficulties with the online system.

Also introduced were the Childcare Payments (Eligibility) (Amendment) Regulations 2017 which made some changes to the definition of paid work, corrected an error in the paid work regulations, and extended the period that parents can apply for TFC before returning to work or starting work from 14 days to 31 days.
24 November 2017 – The Childcare Payments Act 2014 (Commencement No.5) Regulations 2017 expand the scheme to those with children born on or after 24 November 2011 as well as those who are responsible for a disabled child (until the last day of the week in which the 1 September following their 16th Birthday falls).
15 January 2018 – A Parliamentary debate was held following an e-petition on the closure of the childcare vouchers scheme. The Commons Library published a comprehensive debate pack ahead of the debate which included comparisons between childcare vouchers and the TFC scheme.
15 January 2018 – The Childcare Payments Act 2014 (Commencement No.6) Regulations 2018 expand the scheme to those children born on or after 15th January 2009 as well as those who are responsible for a disabled child (until the last day of the week in which the 1 September following their 16th birthday falls). In addition the Regulations confirm that the scheme will open fully from 14 February 2018.
14 February 2018 – The scheme opens to all eligible persons and roll-out is complete.

Last reviewed/updated 1 July 2022

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