26 / 6 / 2014 2.35pm
Childcare vouchers enable employees to pay for childcare out of their PRE-TAX and National Insurance income. If both parents (if basic rate tax payers or higher/top payers who joined the scheme before 5 Apr 2011) are allowed to get a maximum of £243 per month worth of vouchers meaning some families will gain £1,000s from this over a year.
From 6 Apr 2011 new joiners paying higher or top rate tax had their allowance dropped so that all tax payers have roughly the same maximum tax gain. From April 2013 the limits are £28 a week for higher rate and £25 a week (up from £22 last year) for top rate payers.
The new tax-free childcare scheme
The Government announced that a new Tax-Free Childcare scheme will replace the existing childcare vouchers programme in Autumn 2015. If you're already on the current scheme, this remains unchanged until your child reaches 15 (providing you stay in the same job). This new scheme, unlike childcare vouchers, will be open to all qualifying parents, not just people whose employer offers the scheme.
Tax-Free Childcare will be open to single parents/couples who work more than 8 hours a week (including the self-employed) and who pay for Ofsted-registered childcare for a child under the age of 12 (or 16 if the child is disabled).
Under Tax-Free Childcare, eligible families will get 20 per cent of their annual childcare costs paid for by the Government. This could mean up to £2,000 per child (the scheme assumes a maximum of £10,000/year childcare costs per child).
It is also important that as an employer you do ensure you let your employees know that childcare vouchers do have an effect on how much Childcare Tax Credit they can claim, so while many employees gain from the voucher scheme some, especially those on low incomes are actually worse off by using childcare vouchers.
For a guide and actual tax credits entitlement go to the Better Off Calculator to check in detail or call the Tax Credit Helpline on 0345 300 3900.
Free childcare for 3 or 4 year olds
Your employees may be eligible for free ‘early learning’ classes (includes time at a school-attached nursery) available for all three or four year-olds (starting from the term after your child's third birthday). For at least 38 weeks a year they are entitled to 15 hours a week (to be spread over at least three days). Things may be slightly different in Scotland, Wales and Northern Ireland, contact your nearest Family Information Service (FIS) to check your entitlement.
Employees can contact their local (FIS) for up-to-date details of local childcare, early year’s provision and holiday clubs in the local area. If employees need to pay for any of the local run schemes then it can sometimes be part of their Childcare Tax Credit application (as long as the provider is Ofsted registered). They can also usually pay for the holiday provision with Childcare Vouchers, although it's best to check before booking that the school you've picked allows this.
For more information from HM Revenue and Customs “How you can help your employees with childcare”