Employers regularly offer childcare vouchers to employees as an efficient way of tax saving for both the employee and employer.  This works via a salary sacrifice arrangement, where the employee receives child care vouchers instead of taxable pay.

The scheme has been popular with parents and has allowed eligible parents to earn up to £55 per week in childcare vouchers.

However, the scheme is set to change and from 4 October 2018 the old child care voucher scheme will close to new entrants.  Anyone who is already part of the scheme on 4 October 2018 will be able to remain in the scheme.

The new system will be called “Tax Free Childcare”.  Users will be required to deposit funds into an account on the HMRC website.

For every £8 deposited into the account, the government will then add £2.  Users then pay their approved childcare provider via the online account.

You can get Tax Free Childcare if you and your partner are;

  • In work or getting parental leave, sick leave or annual leave
  • Each earning at least the national minimum wage for 16 hours per week

You’re not eligible if;

  • Your child does not usually live with you
  • The child is your foster child
  • Either you or your partner has taxable income over £100,000
  • You’re from outside the EEA
  • Your child is 11 or over

Unfortunately, there are a large number of variables which make it difficult to understand which system is better for each individual.

Due to this it is recommended to visit the HMRC website and use the online calculator to work out if you will be better off staying in the old system or joining the new system.

If you would like to discuss this in more detail, then please contact Gareth Botterill on 01482 862240 or email gareth@botterillco.co.uk

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