How will Tax Free Childcare work?
For every £8 you pay into a Childcare account, the government will pay in £2. It will put in a maximum of £500 every three months for each child - or £1,000 if your child has a disability.
This will operate through an online Childcare account, provided by National Savings & Investments (NS&I) in partnership with HM Revenue and Customs (HMRC), which parents and government can pay money into.
You will pay your childcare costs into this account and the Government will 'top-up' the account with their contribution. Any other person, a grandparent or family member for example, can pay into the account as well.
The money will then be paid directly from this one account to your childcare provider.
If your circumstances change or you no longer want to pay into the account, then you’ll be able to withdraw the money you have built up. For any amount you withdraw, the government will withdraw the contribution it has made based on that amount.
The accounts will involve no fees and will allow you to build up credit for use when you need it most, for example during school holidays.
Updated August 2016