Time is running out for childcare vouchers
This new scheme is being referred to as Tax-Free Childcare, and is being launched to enable working parents to access savings on their childcare costs.
Currently using Childcare Vouchers?
Many parents who currently use Childcare Vouchers will be better off continuing with the scheme, especially those falling into the categories below:
- Middle-low earning parents if not eligible for Working Families Tax Credit
- Basic Rate tax payers spending less than £9,336 on childcare each year
- Families with only one working parent
- Families with low childcare costs e.g. only using a few hours per week and before and after school clubs
- Families using Childcare Vouchers for extra curriculum activities through an Ofsted or Independent School provider
- Families using childcare for children over the age of 12
- Families who want to start saving towards childcare costs as soon as their baby is born
- Family run businesses where savings can be made on PAYE, Employers National Insurance and Corporation Tax
- Families where one parent earns above £50,000, can use salary sacrifice to reduce their salary, which should enable them to receive more child benefit
What is Tax-Free Childcare?
Tax-Free Childcare will see the government subsidising 20% of a child’s childcare costs on fees of up to £10,000 per year, saving up to £2,000 per child, per year.
However, not everyone will benefit from the new scheme. This is because new rules have been put in place regarding the eligibility of different families and their children.
This means after 6th April 2018 you may not be eligible for any help with your childcare costs at all.
Who will benefit from Tax-Free Childcare?
- Self-employed people as they were not eligible for Childcare Vouchers
- Parents with very high childcare costs (i.e. over £10,800 of childcare for at least one child). The help goes up the more children are receiving childcare in addition to this.
What are the options?
Employees are currently able to switch to Tax-Free Childcare and sign up to using the online “Childcare Choices” system. Once employees make the switch to Tax Free Childcare, they will not be able to go back to using Childcare Vouchers. This rule is applicable even if parents find they are worse off using Tax-Free Childcare.
Another option for employees is to sign up to the Childcare Voucher scheme. This scheme is still open to new applicants and will be until 5th April 2018. As long as employees are signed up before this, they will be able to use the scheme indefinitely.
How much time is left to make a decision?
If parents find that they would be better off using Childcare Vouchers, they only have until April 2018 to sign up to claim them. For employers, this is also the case if considering implementing a Childcare Voucher scheme for employees.
Saving employees money on childcare is a great way to improve employee engagement and reduce time spent off work, as it will give your workforce peace of mind that their childcare costs are covered.
By understanding and addressing the needs of your workforce, employee benefits can help boost staff retention through keeping your staff healthy, happy, and more likely to stay within your organisation long-term.
Unsure on which scheme is best?
The government has provided a useful calculator enabling employees to see which scheme works best for them, as well as calculating the assistance they are entitled to. Click here to go to the calculator.
This article was provided by Busy Bees Benefits.