Do you need to register for Childcare Vouchers before it’s too late…?
This autumn sees the introduction of ‘Tax-Free Childcare’; a new Government scheme to help families with their childcare costs; replacing the existing childcare vouchers scheme.
The current voucher option only applies where an employer operates a scheme for its employees. Vouchers of up to £55 per week can be provided free of tax and National Insurance Contributions (NIC), which is typically dealt with via a salary sacrifice arrangement. Under the voucher system, it is possible for both parents to receive vouchers thereby doubling the benefit, provided their respective employers both offer schemes; even where there is only one child.
The new scheme removes the need for an employer to facilitate it, and enables eligible families to get 20% of their childcare costs paid for by the Government. The scheme is open to parents who work and have annual incomes below £150,000. Parents open a Childcare Account, and for every £80 they pay into it, the Government will add a further £20. The annual maximum which can be contributed is £10,000 per child enabling families to save up to £2,000 per year, per child on childcare costs.
There are various permutations and scenarios under which the voucher scheme may be more beneficial to parents than its successor, and vice versa. It is important to note that Tax-Free Childcare cannot apply to couples where one parent works and the other does not. Also, generally speaking, basic rate taxpayer couples are likely to see more savings under a voucher scheme than the Tax-Free Childcare scheme.
It is important to note that once the new Tax-Free Childcare scheme comes into force, it will no longer be possible to join a voucher scheme – but anybody who is already a member of a voucher scheme at that time can continue to benefit for as long as their employer runs the scheme (or they remain in that employment).
Many parents, and parents-to-be, will now need to carefully consider which scheme will benefit them the most, as well as facing a looming deadline of whether to register for childcare vouchers before the autumn or not. Once this deadline passes, vouchers will no longer be available. Even if childcare costs are not currently being incurred, but will be in the near future, it may make sense to register for vouchers, if possible, before autumn to safeguard higher savings.
For further information or advice please contact Richard Whitelock on 01904 464100 or firstname.lastname@example.org.