Omnium Employee Benefits

The Childcare Voucher Scheme

Childcare Vouchers can save many parents with children aged up to 15 over £1,000 a year on childcare.

This is because legislation currently allows parents to pay for childcare from pre-tax income, which means that there is a saving in both Income Tax and National Insurance.

In very broad terms, the cost of £1,000 of childcare vouchers is reduced to about £700 – thus saving an individual £300 every year.

At the moment, a basic rate taxpayer can pay for up to £243 of childcare with vouchers each month. As this applies to each parent, if both parents are working then this can double to £486 per month.

It is important to note that, once purchased, Childcare Vouchers cannot be refunded.

Higher and additional rate taxpayers can also benefit, however, the benefits have been reduced and, as a result, the overall saving is lower.

All providers of childcare who can accept these vouchers must be regulated by Ofsted. This applies equally to a nursery, playgroup, childminder or au pair and can apply, in certain circumstances, to tuition as well.

The new Tax-Free Childcare Scheme

However, in April 2017, the government launched the new Tax-Free Childcare Scheme which gives eligible families an extra 20% towards childcare costs.

This means that, from April 2018, no new applicants will be able to join the Childcare Voucher Scheme. Existing benefits will continue to apply as long as the parent concerned remains with the same employer.

Under the new Tax-free Childcare scheme, eligible families will be able to pay for childcare of up to £10,000 per child each year.

As ever, some parents will be better off under one scheme and some in the other. The calculation to see who benefits most from each scheme can be complex so advice should be taken.

Get in touch

If you would like to find out which scheme is right for you, or, as an employer, for your employees, please give us a call on 01483 205890.

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