Childcare vouchers

by Aspiring Training on August 26, 2015 No comments

The cost of childcare is a huge burden for many families, so any help an employer can provide is very welcome. Currently employers can provide tax free childcare vouchers worth up to £55 per week to each qualifying employee. This amount is restricted to £28 or £25 per week if the employee joined the childcare voucher scheme after 5 April 2011 and pays tax at 40% or 45%.

This scheme works well for employees, and can be used by owner-managed companies. But it cannot apply to the self-employed, or where the employer chooses not to offer childcare vouchers. Some employees may also be worse off if the childcare vouchers are part of a salary sacrifice arrangement and they claim child tax credits which cover only 70% of the cash amount (excluding vouchers) they pay for childcare.

To solve these problems the Government is introducing a new scheme called “tax-free childcare” to take effect later in 2015. This will be open to all working parents of children aged under 12 (17 if disabled), whether the parents are employed or self- employed, but not to those claiming tax credits or Universal Credit.
Parents in an employer-provided childcare voucher scheme will be able to choose to move to the new scheme or stick with existing vouchers. However, no new employees will be allowed to join an employer-provided voucher scheme once the new tax-free childcare accounts are launched.

nder the new scheme the parents will pay into a childcare account held with NS&I. For every £8 saved the Government will contribute £2, up to £2,000 per year per child. The childcare savings can only be used to make online payments to registered childcare providers, including nannies, childminders and school-based care.

Families with three or more children will get more tax-free support under the new scheme, but both parents must be working in order to qualify. Those earning over £150,000 are excluded from the new scheme. We can help you decide whether to keep with the current vouchers or move to the new scheme.

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