Tax Efficient Childcare Schemes

Earlier this year the government announced that no new Childcare Voucher Schemes could be set up after 5 October 2018, If employers, who offer such old style schemes at 5 October 2018 are prepared to carry on administering their scheme, then they will continue to be available, but will eventually be phased out.

The old style Childcare Voucher Scheme allows employers to provide vouchers to employees to pay for care of their children up to age sixteen. Vouchers to the value of £55 a week can be provided tax free to basic rate taxpayers with differing tax free amounts for higher rate and additional rate taxpayers.

The new replacement scheme is the government’s Tax-Free Childcare Account. Under this scheme the government will pay £2 for every £8 you pay your childcare provider via an online account, up to a maximum of £2,000 per child per year (£4,000 for a disabled child). To qualify the child must be aged 11 or under (17 or under for a disabled child).  You and your partner, if you have one, should also be working, or on parental or sick or annual leave, and not earning over £100,000.

Thus, savings of £8,000 into your online account would be topped up by the government to £10,000.  The £10,000 could then be used to pay approved childcare providers such as nurseries, childminders, after school clubs and summer camps.

Unlike childcare vouchers, the new Tax-Free Childcare Accounts will be available to both employees and the self-employed.

For those already in Childcare Voucher schemes it may be beneficial to consider switching to the new Tax-Free Childcare Account and we can help you work out whether or not this would be advantageous.

Returning to work in the accountancy profession after maternity leave

Photo by Tom Reynolds under licence by Creative Commons Licence