Under the scheme, parents will be able to open an online account which is used to pay for childcare from a registered provider.

Parents do not have to switch to tax-free childcare as employer-supported childcare will continue to run and will remain open to new entrants until April 2018. Parents who are enrolled by this time will be able to continue using it for as long as their employer offers it.

However, tax-free childcare will be open to twice as many parents as employer-supported childcare and the new scheme does not rely on employers making the option available, allowing self-employed parents to get support with childcare costs.

For every £8 the parents pay in, the government will pay in £2. Parents can receive £2,000 per year, per child towards childcare costs, this doubles to £4,000 for disabled children.

The scheme is available for children up to the age of 12 or 17 for children with disabilities.

To qualify for the scheme the parents must be in work and earning a minimum of £115 per week and no more than £100,000 per year.

For the childcare provider to receive tax free childcare it must be regulated or approved for example, by Ofsted.

Letters will be sent to providers in September and October 2016 inviting providers to register online. Once registered the provider will appear on HMRC’s new digital tool that allows parents to search for childcare providers that are signed up for the scheme.

Businesses where people are working for themselves will need their 10 digit Unique Tax Reference (UTR) number to be able to sign up to the scheme. 

Nannies will need to sign up using their national insurance number.

More information will be issued ahead of the scheme being introduced. 

Guidance on the tax-free childcare scheme is here.