Childcare Vouchers 2018: Will You Be Better Off? | HaesCooper Accountants
Earlier this year, the UK Government announced that the Childcare Voucher scheme deadline for new members has been extended by 6 months, taking the end date from April 2018 to October 2018.
This delay means parents now have a choice – they can choose the new scheme, called ‘Tax-Free Childcare’ or choose to join the older scheme.
What is the difference between the two different schemes?
The easiest way to explain the difference between the two schemes is:
· Tax Free Childcare provides parents with savings per child, per year
· Childcare Vouchers provides parents with savings per parent, per year
The old scheme (childcare vouchers) lets parents pay for childcare from their salary before National Insurance and tax is taken. Each parent is entitled to up to £243 per month, regardless of how many children they have.
Currently this is open to all parents who are basic-rate tax payers and as long as employers offer this option (not all employers have to).
The new scheme (tax-free childcare) is more like a savings scheme for parents – with 20% of childcare costs each year paid by the Government – until the limit of £2,000 (per child) is met.
The new scheme has more rules – for example, both parents must be working 16 hours per week at a specific wage rate to be eligible. In addition to this if either parent earns more than £100,000 per year both parents are not eligible.
Is NIC & income tax relief still available for childcare vouchers?
Well the short answer to the above question is a ‘yes’ for all employees already receiving childcare vouchers on 6 April 2018 provided their employer continues to run the scheme.
For other employees it had been announced by the Government that as from 6 April 2018 the child care voucher scheme is closed to new entrants to the scheme.
However, the Government recently announced that provided that for one of the 52 tax weeks ending 4 October 2018 the parents receive a voucher they can continue to receive the NIC and Income Tax relief for vouchers received after 4 October 2018.
As background the childcare voucher scheme was to be closed to new entrants as from 6 April 2018 to be replaced by the Tax Free Childcare Scheme (TFC) but as mentioned above the Government have extended by 6 months the closure date for new entrants to the existing Childcare Voucher Scheme i.e. 6 months extension from 6 April 2018 to 4 October 2018 provided the new entrant obtains a childcare voucher by 4 October 2018.
Can parents be on both schemes?
No – parents can either claim child care vouchers or be part of the tax free childcare scheme, not both! Parents will need to check their own positions carefully as they may be better off on one scheme – so choosing the right one is essential.
To learn more, visit the ‘Childcare Choices’ website – but be quick, the deadline is the 4th October 2018.
Child Care Voucher & Tax Free Child Care Help
If you’re confused about the recent government announcement and delays – we’re not surprised! This is a very confusing subject for parents and employers alike. Here at HaesCooper accountants we specialist in tax advice and business support.
Our expert and friendly team can help explain everything you need and can help ensure you’re in the right position for any upcoming changes. Contact us today to find our how we can help your business and employees.
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