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Phased roll out of Tax-Free Childcare
The Chancellor has confirmed that Tax-Free Childcare will be rolled out from April 2017. Tax-Free Childcare will be gradually rolled out for children under 12.
Under the scheme the relief will be 20% of the costs of childcare up to a total of £10,000 per child per year. The scheme will therefore be worth a maximum of £2,000 per child (£4,000 for a disabled child). It is expected that all parents in the household will have to meet the following conditions:
• meet a minimum income level based on the equivalent of working 16 hours a week at National Minimum Wage or National Living Wage rates
• each earn less than £100,000 a year and
• not already be receiving support through tax
credits or Universal Credit.
The existing scheme, Employer-Supported Childcare, will remain open to new entrants until April 2018 to support the transition between the schemes.
Universal Credit
Universal Credit is a state benefit designed to support those on low income or out of work.
An individual’s entitlement to the benefit is made up of a number of elements to reflect their personal circumstances. Their entitlement is tapered at a rate of 65% where claimants earn above the work allowances. The current taper rate for those who claim Universal Credit means their credit will be withdrawn at a rate of 65 pence for every extra £1 earned.
From April 2017, the taper rate that applies to Universal Credit will be reduced from 65% to 63%.
Property and trading income allowances
From April 2017, the government will introduce new £1,000 allowances for property and trading income. Individuals with property or trading income below £1,000 will no longer need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way or by simply deducting the relevant allowance. The trading allowance will also apply to certain miscellaneous income from providing assets or services. Any income which attracts rent- a-room relief will not be eligible for either of
the allowances.
Comment
The government has also confirmed that from September 2017, the free childcare offer will double from 15 to 30 hours a week for working families with three and four year olds in England. In total this is worth up to £5,000 for each child.
4 Personal Tax
Budget Summary 2017