Budget boost for 1.9m working families: Osborne extends childcare tax break to £2,000

By

Matt West

|

The Chancellor has confirmed plans to extend a childcare tax break for all working families to £2,000 per child ahead of his Budget statement tomorrow.

The new scheme, which had been announced in last year’s Autumn statement, has been increased from its original £1,200 per child and will now apply to all children under the age of 12.

The scheme will also be fully operational from Autumn 2015 rather than being phased in over seven years as first envisaged.

Extension: Tax breaks for working families are to be extended to all children up to the age of 12

Working couples where both parents earn less than £150,000 a year will be entitled to the tax break.

The benefit will provide 20 per cent tax relief on childcare costs up to a value of £10,000 – £4,000 higher than originally proposed.

For the first time self-employed and part-time workers will be covered by a lower earnings threshold at £50 per week and provision would also be made for those running fledging businesses.

The existing voucher scheme will continue for those already using it but be closed to new entrants. It currently offers £243 per month tax relief to 20 per cent tax payers and £124 per month tax relief to those earners paying 40 per cent tax – £2916 and £1,488 a year in tax relief respectively.

For a family with one child where both parents are working and paying 20 per cent income tax that would amount to £5832 tax relief. If both parents were higher rate income tax payers they would still receive £2976 tax relief.

However, the current voucher schemes have had poor take-up among employers and are not available to the self-employed or part-time workers.

The government estimates around 1.9million families could benefit, twice as many as under the present scheme.

The change comes as a recent survey showed many families were paying as much on childcare as they are on their mortgage.

The Labour party has pledged to extend the number of free nursery school hours for three and four year-olds from its current level of 15 hours to 25 hours per child – equivalent to an additional £1,500 a year.

It said today support for children and families had been cut by £15billion since 2010 and dismissed the promise of a tax break after the next general election as ‘too little too late’.

Budget: The Chancellor delivers his penultimate Budget statement before the 2015 general election but there are unlikely to be many tax giveaways

But the government’s policy has faced criticism for

excluding couples where one parent does not work and being available to

high-earning households with a joint income of up to £300,000.

In

a bid to counter accusations that the policy benefits better-off

families, there will be a £50million boost for nurseries looking after

the most deprived three and four-year-olds.

And

in what children’s charity Barnardo’s hailed as a ‘double victory’ for

the poorest families, it was confirmed that families claiming Universal

Credit will have 85 per cent of childcare costs met, up from 70 per

cent.

Details of how that would be funded ‘from within the Universal Credit programme’ would be set out at the time of the Chancellor’s Autumn Statement, Number 10 said.

Prime Minister David Cameron said the proposed tax break would ‘help millions of hard-pressed families with their childcare costs and provide financial security for the future’.

Mr Cameron is due to make a joint appearance to highlight the package alongside Deputy Prime Minister Nick Clegg – who was expected to focus on the help for poorer families.

‘As, together, we build a stronger economy for Britain, I’m committed to making sure that we create a fairer society too,’ the Liberal Democrat leader said.

‘We want to ensure that everyone can get on and succeed.’

Shadow minister for children Lucy Powell said: ‘Of course any childcare support is welcome but this government has done nothing in this Parliament to help parents experiencing a cost-of-living crisis.

‘Childcare costs have spiralled by 30 per cent since 2010 and the Tories have rejected Labour’s plan for 25 hours’ free childcare for working parents of three and four year olds.’

Anand Shukla, chief executive of the Family and Childcare Trust said: ‘Given that British parents pay more for childcare than in any other European country, today’s news of extra help for families with the cost of childcare is both important and timely.

‘The recent Family and Childcare Trust report showed that even part-time childcare costs outstrip the average UK mortgage bill, clearly demonstrating that childcare affordability is a national priority.

‘We’re delighted that the Prime Minister and the Deputy Prime Minister have today recognised that an investment in childcare is an investment both in our economy and in our future.’

Barnardo’s assistant director of policy and research, Jonathan Rallings, said research showed that poorer children could find themselves 15 months behind by the time they started school.

‘Today marks a victory for the UK’s most disadvantaged children, on which the Government should be congratulated,’ he said.

‘We now look forward them boosting the nursery premium over time so that it eventually reaches the same level as the Pupil Premium.’

The 4Children charity said the package was ‘positive and welcome’ but pointed out that parents still faced having to find up to £8,000 for childcare each year.

Comments (10)

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hfgjfjfghjfg,

London, United Kingdom,

moments ago

For this year only???? Os-Burn??!!!

philis_dude,

exeter, United Kingdom,

1 hour ago

For those that can afford childcare its great 20% off! For those that can’t afford it 20% of nothing is still nothing! Do the conservatives really think families on low income can afford any childcare!

Common Man,

London,

1 hour ago

Another omnishambles in progress. Families on £300,000 can get £2,000 for child care when both parents work bot not a family on £30,000 if one parent works. The problem is Cameron, Osborne, Clegg and Ed can get £2,000 for child care but their cleaner cannot.

Common Man,

London,

1 hour ago

Cameron and Osborne have rented their London houses and live in tax payer paid houses to they might not the £2,000 as their income will be over £150,000 a year but they will enjoy the 5% tax cut they gave themselves.

The wizard,

london, United Kingdom,

1 hour ago

This totally mad… it is just encouraging more Government spending at DEBT.. While the NHS is suffering with less beds when 1000s more are needed…Regarding the help to buy scheme, it really only helps those that have any chance of buying a house in the first place… the rest no chance at current house prices and low incomes… What took one person to buy a house 30 years ago, now takes 2 people to buy the same house with 10 times the amount of debt per person. … This shows how over 30 years the UK is going…WITH MORE AND MORE GOVERNMENT ENCOURAGED DEBT…. 30 years ago the national DEBT was in MILLIONS, then increased to BILLIONS and now is over a TRILLION… Are our 650 MPs totally mad driving us all into a DEBT SWAMP to sink with it all … in the future…?

Antonio Tomasso,

Glasgow, United Kingdom,

1 hour ago

Wrong. Just plain wrong. Why are am I paying for other peoples kids?? Their kids they should pay for them. If they can’t afford them it’s their problem not mine.

Paul,

London, United Kingdom,

48 minutes ago

So who looks after you in hospital, serves you in shops etc if not other peoples children?

cynical,

London, United Kingdom,

1 hour ago

How’s about instead of giving parents a measly £2k you make the cost of living low enough that families don’t require two incomes to survive? You know, let them actually spend time with their kids instead of dumping them in the nursery.

philis_dude,

exeter, United Kingdom,

50 minutes ago

Could not agree more! Children should be with there 1 parent! To be honest I personally believe the problem stems from couples/families wanting more and more so then both go out to work. This causes prices to go up more as initially there is more disposable income. Now we are at the times when both, generally, have to work to get what 1 income would have got 30 yrs ago

Antonio Tomasso,

Glasgow, United Kingdom,

moments ago

It’s bra cause of social mobility and stupid employment rights Etc. First people want more money etc but not understanding that if wages go up so do costs and them prices. So all the do gooders who wanted to ensure people’s standard of living went up now understand that it means theirs goes down to compensate. No such thing as a free lunch.

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Budget boost for 1.9m working families: Osborne extends childcare tax break to £2,000