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Childcare Vouchers - it's all change from April 2018

October 30, 2017

Are you aware that current childcare voucher schemes are due to close to new applicants from April 2018?
 
With Christmas fast approaching, spring 2018 will soon be upon us and it's therefore important for organisations who run childcare voucher schemes to be aware and communicate the changes/differences between the two schemes to employees.
 
Employees who had already signed up to a company's scheme will be eligible to keep receiving vouchers, but they won't be able to rejoin the scheme if they leave. If an employee changes job, they won't be able to join a new company's scheme from April 2018.

 

The new scheme which is also a tax-free childcare scheme, won't operate in the same way meaning some parents could be worse off financially if they ditched their vouchers in favour of the new scheme.

 

 

The new scheme: what is Tax-Free Childcare?

 

Under the new scheme, eligible families will get 20% of their annual childcare costs paid for by the Government. The way it works is that for every 80p you pay into a newly-created Childcare Account, the Government will contribute 20p. This could mean up to £2,000 per child as the scheme assumes a maximum of £10,000 per year childcare costs per child.  If you pay more for childcare unfortunately you will not receive any extra help.

 

The new scheme will be open to single parents/couples who work eight or more hours a week, including self-employed, and who pay for Ofsted registered childcare for a child under the age of 12, or under 17 if the child is disabled.

 

It will also be open to all qualifying parents, unlike childcare vouchers which can only be bought by people whose employer offers the scheme. 

 

To be eligible for Tax-Free Childcare, you will need to:

  • Have one or more child aged under 12 when the scheme starts in 2017.

  • Work at least 16 hours a week, being paid the National Living Wage or higher - this means both of you if you're in a couple.

  • Earn under £100,000 a year. This applies to both of you if you're in a couple (so if one earns more than £100,000, then - as a couple - you can't access Tax-Free Childcare).

  • Not be claiming tax credits (this includes the childcare element of Working Tax Credit) or universal credit.

 
Childcare vouchers vs Tax-free Childcare scheme?

 

Tax-Free Childcare:

  • Good for self-employed people or couples who earn less than £100,000 each, as they are eligible for Tax-Free Childcare, but can not get childcare vouchers.

  • Good for parents with more than one child and who have high childcare costs, as the help available goes up with the number of children. There is a limit for childcare vouchers which is not dependent on the number of children.

 

Childcare vouchers: 

  • Good for couples where one parent does not work, as they are not eligible for Tax-Free Childcare, but the employed parent is eligible for vouchers (provided their employer offers the scheme).

  • Good for basic-rate taxpayer parents with total childcare costs of £9,336 or less. Under this amount the saving you make with childcare vouchers exceeds the saving you can make with Tax-Free Childcare.

  • Good for higher-rate taxpayer parents with total childcare costs of £6,252 or less. Under this amount, the saving you make with childcare vouchers exceeds the saving you can make with Tax-Free Childcare.

  • Good for higher earners, as anyone earning £100,000+ (or in a couple where one earns £100,000+) isn't eligible for the scheme, whereas these high earners can get childcare vouchers.

 

 

 

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