The Fizz! Blog

New Tax-Free Childcare Scheme - good news for the self-employed!

The government have begun the process of introducing a new way of paying for childcare that could save up to £2,000 per child per year for those who are eligible to use it.

To be eligible, your child has to be under 12 (or under 17 if they have a disability), you and your partner (if you have one) must both be working and earning an average of at least £120 per week, and you must both earn less than £100k per year.  If you're in your first year of self-employment, there's an exemption from the £120 per week hurdle.  As the new scheme is open to both employees and the self-employed, it's definitely worth a look for those who are self-employed and aren't eligible for the old Childcare Voucher scheme. 

Once in the scheme, you'll open an online account, and for every £8 you put in, the government will put

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in another £2.  The most you can contribute in a year is £8,000 per child, meaning the maximum government contribution is £2,000 per child.  Contributions can come from you, family, friends, or your employer - the government will still pay in, regardless of where your contribution comes from.  Within the overall limit, there will be flexibility about when and how much you pay in, so you won't have to stick to a fixed regular amount.

Your childcare provider must be registered with regulator (e.g. OFSTED), and must be signed up to the scheme themselves.

You can't use the scheme if you also receive Childcare Vouchers, or if you claim Tax Credits, so choosing whether or not to sign up may not necessarily be straightforward.  For those of you already receiving Childcare Vouchers, it's worth calculating whether you'll be better off switching to the new scheme if you're eligible.  Generally speaking, those with more children and higher childcare costs will be better off using the new scheme than those with only one child and low childcare costs.

If you have a child who will be under 4 years old on 31 August, you can apply for the scheme (for that child and any other children under 12) immediately.  Everyone else has to wait a while, but the scheme should be fully up and running by the end of the year.  For more information, to apply, or to sign up for email alerts as the scheme is rolled out, go to www.childcarechoices.gov.uk.

 

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Should I carry on claiming Child Benefit?

Child Benefit used to be easy.  You had a child, you got Child Benefit, end of story.  A few years ago it became more complicated.  If neither partner earns more than £50,000 you get to keep it.  If either partner earns more than £60,000, you have to give it all back.  If the higher earner has income of between £50,000 and £60,000, you have to give some of it back.

That means that some people, absolutely certain that someone in the household will earn more than £60,000, go down the route of just not claiming the Child Benefit in the first place, rather than claiming it and then having to give it all back via their tax return.

That’s fine – as long as circumstances don’t change.  If they do, then hopefully the person will remember to start claiming Child Benefit again.  If they don’t, they’ll lose out permanently.  Even if they do remember to start claiming again, the Child Benefit people have an annoying habit of also paying out the benefit for earlier years, which might not actually be due to be refunded.  Then you’ve got to redo earlier years’ tax returns so that you can give it back again!

So if you want a cast iron, belt and braces approach – claim the benefit, repay it as appropriate via your tax return.  In the meantime at least it’s in your bank account rather than theirs.

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How cars have become like houses

15 years ago, people often used to say "I hate debt - I'd never finance anything, apart from a house of course".

Now, the same people say "I hate debt - I'd never finance anything, apart from a house or a car of course".

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It doesn't matter what *you* think

If you formed everyone in the world into a line, in order of how likely they were to buy from your business, you would be right at the back.  Six billion people in front of you.  You are definitely not going to buy anything from your business, that's for sure.

So, to some degree, your opinion about your business is totally irrelevant.  The opinions of the people who might actually buy from it are what actually count.

Of course, you can't toil away in a business you hate, and it's important that the thing is conceived and operated in a coherent and thoughtful manner.  So you're very important in other ways.  And you may well have great insight into what people who are like you will enjoy.  But often the businesses that fail most badly are the ones that were set up on the basis that they were a business the owner would love to shop at/drink at/whatever.  The assumption that everyone else will be into just the same thing can be flawed.

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