Act now to protect your Childcare benefit – financial support may fall from 6 October

Families who want childcare vouchers must apply soon as the scheme is closing to new applicants on the 6th of October 2018 and been replaced by tax-free childcare.

The current “childcare voucher scheme” allows you to exchange part of your gross salary in exchange for vouchers, with that portion being exempt from income tax and national insurance contributions.

The 6th October deadline is especially important for couples where one parent does not work or where one parent earns more than £100,000 a year, as these groups will not qualify for the governments new scheme

However, you can continue to receive childcare vouchers if you’ve already joined a scheme or get your first voucher by the 5th of October 2018. You can continue to receive childcare vouchers as long as you stay with the same employer and they continue to run the scheme and you don’t take an unpaid career break for longer than one year.

So, what is the main difference between the two schemes?

• Currently under childcare vouchers, a couple with one child can make savings of up to £1,866.

Under the new tax-free childcare scheme, the maximum saving per child will be £2,000.

At first glance it appears that the tax-free childcare is more beneficial.

Importantly though, the new scheme will only allow you to receive 20% of your child care costs (albeit up to a higher maximum of £2,000 per child)

This means you need to spend £10,000 per child on childcare in a year in order to receive the maximum £2,000

This contrasts with the current voucher scheme which requires a £1,866 spend to qualify for £1,866 benefit allows you to pay up to 100% of your child care costs.

• Employers also make savings of up to £402 per annum through reduced employer NIC payments under the childcare voucher scheme. By participating in the voucher scheme, you may be able have some or all of employer savings passed on to you through other benefits. This is not available in the new scheme.
• Finally, it is not possible to make a tax-free childcare claim under the new scheme where either one parent does not work or where either parent is in receipt of Universal Credit.

If you would like to discuss this with one of our team, please contact us on 0131 317 73777.